Our economy is sick, says Governor Forau

Governor of Central Bank of Solomon Islands Dr. Luke Forau has described the country’s economy as a sick man.

When asked about health status of the economy in the past year Forau said “our economy is sick” and he also highlighted the challenges that it faced in the past 12 months what is expected this year as the economy struggles to get out of its sick bed.

Dr. Forau was speaking to journalists after he launched the CBSI 2022 Annual Report this morning.

He said though it is expected to recover the economy is facing two extreme challenging immediate development issues (i) low growth/high unemployment and (ii) high inflation. He said these are caused by recent successive external and domestic shocks that hit the economy over the last three years.

He pointed to the pandemic-induced supply chain disruptions, rising food and fuel prices that is depleting the country’s foreign reserves, lingering impacts of the November 2021 riots, spill over effects from the war in Ukraine to the local covid-19 outbreak earlier in 2022.

“We are facing shocks and shocks after with further risks of future disruptions and policy uncertainty,” he said in his statement whilst launching the report.

Dr. Forau said consequential impacts from these shocks placed the economy in a very weak positon in 2022, with broad-based reductions evident across all sectors of the economy and as a resultant 3.6% contraction in GDP at the end of the year.

The governor said for 2023, the economy is expected to recover but it is a fragile recovery, owing mainly to increasing risks from high global food and fuel prices from the ongoing war in Ukraine and associated intensifying risks of future commodity price shocks and financial stability risks that threaten to further complicate any responses and their implementations.

Dr. Forau said the converging risks confronting “our economy today, have only further exacerbated an already anemic economy, with associated divergent forces at play well before the pandemic.

He added that by sectorial contributions, activity in the primary sector fell by 3.4% points, this is owed mainly to decreased production in log, palm oil, copra, cocoa and fish outturns.

Dr. Forau also revealed that the services sector fell by 0.4% points which stemmed from decline in overall business services in the economy.

He admitted that this weak economic activity has resulted in the worsening of the country’s external position which deteriorated to an overall balance of payment deficit of $192m, owing mainly to a widening trade deficit of 14% of the GDP.

Meanwhile the governor highlighted three areas that must be reprioritized for economic recovery and sustainable development growth.

“We must reprioritize our policies (do things differently) and focus on sectors that will support recovery, drive and sustain the economy,” he said.

Dr. Forau added: “We must accelerate reforms and put in place policies that would provide the impetus for the private sector and new investor to thrive and overcome barriers in doing business.”

And, he added: “We must recognize and collectively respond to opportunities that are present in today’s changing economic landscape.”

News@SBMOnline2023