SI’s economy will not return to pre-COVID-19 level until 2025

Solomon Islands economy will not return to pre COVID-19 levels until 2025 though other regional economies have bounced back faster after the pandemic, The World Back revealed today.

In a press briefing in Suva, at the margins of the Forum Economic Ministers, the Bank’s economists outlined the current state of the Pacific economies in their second Pacific Economic Update of 11 Pacific Islands countries including the Solomon Islands.

The Bank said despite uncertainties in the global economic recovery, Pacific economies are expected to see ongoing expansion in 2023 and 2024. Fiji led the Pacific’s post-COVID-19 recovery with open borders and a strong rebound in 2022 and is now on track to reach its pre-pandemic output level in 2023.

As for Solomon Islanads, after three consecutive years of negative economic growth, the country’s economy is forecast to return to growth in 2023, buoyed by a normalisation of borders and the resumption of major infrastructure projects. Economic recovery is supported by the 2023 Pacific Games and large energy and transport projects.

The bank says large-scale investments for the 2023 Pacific Games and expenditure for the 2024 elections will add to existing budget pressures, contributing to a widening fiscal deficit though inflation is expected to ease in 2023 and further decline from 2024 onwards.

However, the country’s economy is not expected to reach its pre-pandemic growth levels until 2025 due several shocks including civil unrest in November 2021, decline in logging and agriculture productivity.

According to Lodewijk Smets, World Bank Country Economist for Solomon Islands, who explains that the economy is expected to return to pre-covid levels in 2025, largely driven by the Pacific Games, a large infrastructure pipeline, and increased mining activity. Other potential growth sectors – especially in the medium-term – include tourism, labour mobility and digital connectivity.

He told this magazine that to support growth, however, structural reforms are needed, including domestic revenue mobilization – for example, the Value Added Tax Bill – public investment management, and an improvement in the business environment such as more affordable energy prices.

Smets adds: “Also,  while mining and other resources offer important growth opportunities, mining operations need to be transparent, well regulated, and well managed, to avoid social and economic issues for local communities and the country at large.”

 The World Bank’s Pacific Economic Update, second of the year, provides a twice-yearly assessment of 11 Pacific Island economies: the Federated States of Micronesia (FSM), Fiji, Kiribati, Nauru, Palau, Republic of the Marshall Islands (RMI), Samoa, Solomon Islands, Tonga, Tuvalu, and Vanuatu.

News@SBMOnline2023