Economy projected to recover to 1.5% growth this year from minus 4.3% in 2020

The Central Bank of Solomon Islands has projected a recovery of 1.5% growth for the economy this year at the back of a minus 4.3% last year.

Speaking to the press today, the Governor of Central Bank of Solomon Islands, Dr Luke Forau said the domestic economy entered a recession in 2020 with an economic growth of minus 4.3%, he adds put it differently, the economy contracted by 4.3%. 

“This year we are projecting a recovery of a 1.5% growth on the back of key national infrastructure projects and recovery of some sectors such as the fishing and agriculture.

“Over the medium term (2022 – 2025), growth is expected to average at 3.5%, with high growth rates concentrated in 2022 to 2023 of around 5% and 6%. This will come mainly from the anticipated booming construction activities for the Pacific Games and other key national projects such as Tina Hydro. Despite this positive outlook, risks are skewed to the downside and remain highly uncertain,” he told journalists.

With regards to prices, Dr Forau said inflation trajectory has been low over the years and remain so throughout 2020 and into the first half of this year.

The latest figure we have is for April 2021, recording at minus 1.4% from minus 1.8% in December 2020.

He said the slight increase was driven mainly by the pick-up in oil prices combined with continued weak demand in the economy.

The Governor said inflation is expected to improve to 3.0% by year end.

Meanwhile Dr Forau said the external trade deficit has widened in the first five months up to May 2021, with a 15% fall in exports while imports dropped by 10%.

He adds most export commodities, in particular round logs slowed down as expected and weaker domestic demand also had had a negative impact on import consumption.

In terms of exchange rate, the Solomon Islands dollar (SBD) had remained stable against the Trade weighted basket index, with a small upward movement of 1.22% in June. 

Accordingly, the US dollar (the internationally convertible currency) remained stabled against the local currency. The Solomon Islands exchange rate regime is that of a managed pegged to a basket of currency.