The World Bank’s Growth Projection for 2025

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Peter Forau

Honiara

The World Bank projects that the Solomon Islands economy will experience accelerated growth starting in 2025. This follows a period of economic challenges exacerbated by the COVID-19 pandemic, global supply chain disruptions, and domestic issues such as political instability and the impacts of climate change. Growth projections are likely driven by the anticipated recovery in global markets, increased infrastructure investments, and the expansion of key sectors such as agriculture, fisheries, mining, and tourism.

According to the World Bank, higher economic activity in these areas will contribute to greater GDP growth, improving living standards, and reducing poverty levels in the Solomon Islands. However, for these positive projections to be fully realized, the Solomon Islands must undertake structural reforms, address existing bottlenecks, and implement forward-looking policies that strengthen its resilience to external shocks.

While the Government must start putting enabling policies, it must fix the roads in Honiara and work with partners to modernize Honiara and Provincial towns. Honiara and the Provincial towns are currently the economic hubs and the environment in them has to be modernized to attract investment.

Steps to Realize the Positive Growth Projection

To ensure that the projected economic acceleration materializes, the Solomon Islands must focus on several key areas. By addressing these critical factors, the nation can set the stage for sustainable and inclusive growth in 2025 and beyond.

1. Investing in Infrastructure Development

Infrastructure development is one of the most critical drivers of economic growth, and the Solomon Islands must prioritize investments in roads, ports, telecommunications, and energy. The country has already seen positive outcomes from projects like the Tina River Hydropower Project, which is expected to reduce reliance on expensive imported diesel fuel. Continued focus on such projects, including upgrading transportation networks, can increase access to markets, lower the cost of doing business, and attract foreign investment.

Additionally, improving digital infrastructure will help expand opportunities for businesses, especially in the growing global digital economy. Enhancing internet access across the country can unlock the potential of e-commerce, facilitate the growth of a technology sector, and support education and innovation, all of which are critical for long-term economic growth.

2. Diversifying the Economy

While the Solomon Islands have traditionally depended on natural resource extraction, such as logging and fishing, these industries are subject to volatility in global markets and environmental challenges. Diversifying the economy is essential to reducing reliance on these sectors and creating a more resilient economic base.

Agriculture and fisheries, which employ a significant portion of the population, can be further developed by promoting value-added activities, such as processing raw materials for export. Strengthening value chains and investing in sustainable agriculture practices would allow farmers and fishers to increase their incomes and reduce their vulnerability to market fluctuations.

In addition, there is considerable potential for the Solomon Islands to grow its tourism industry. As global travel recovers from the pandemic, the country can attract more visitors by promoting its rich cultural heritage, pristine marine environments, and eco-tourism opportunities. Diversifying into tourism and services can generate much-needed foreign exchange and create jobs across various regions of the country.

3. Enhancing Human Capital Development

A critical aspect of realizing sustained economic growth is investing in the country’s human capital. The Solomon Islands has a young and growing population, which can be an asset if adequately educated and trained. The government must prioritize education and vocational training, especially in fields that align with the country’s economic priorities such as tourism, agriculture, technology, and renewable energy.

Improving access to quality education and healthcare can boost productivity and equip the workforce with the skills necessary to thrive in an increasingly competitive global market. Higher levels of education and skill development will enable Solomon Islanders to participate more fully in the economy, contributing to higher incomes and more inclusive growth.

4. Promoting Private Sector Development

For growth to accelerate, the Solomon Islands must foster a more dynamic and competitive private sector. Currently, the business environment is constrained by several challenges, including regulatory inefficiencies, limited access to finance, and high costs of doing business. The government can support private sector growth by creating a more conducive business climate through regulatory reforms, reducing bureaucratic hurdles, and improving the ease of doing business.

Access to finance is another critical factor. Supporting financial institutions in providing affordable credit to small and medium-sized enterprises (SMEs) will help fuel entrepreneurship and innovation. The development of microfinance and mobile banking solutions can also extend financial services to rural areas, boosting inclusive economic growth.

5. Strengthening Public Sector Governance and Efficiency

Good governance and efficient public administration are essential for ensuring that the Solomon Islands can effectively manage economic growth. The public sector must focus on transparency, accountability, and reducing corruption to create an environment that fosters investor confidence and sustainable development.

Improving the management of public finances, including the efficient allocation of resources and the management of public debt, will be critical for maintaining macroeconomic stability. By adopting better fiscal management practices, the government can avoid deficits that undermine long-term growth prospects. Additionally, promoting anti-corruption measures will help ensure that development resources reach their intended recipients and that economic gains benefit all citizens.

6. Mitigating Climate Change and Building Resilience

Climate change is a significant challenge for the Solomon Islands, with rising sea levels, increasing storm intensity, and changing weather patterns threatening livelihoods, especially in coastal areas. For growth to be sustainable, the country must invest in climate resilience and adaptation measures, including sustainable land use, disaster preparedness, and renewable energy projects.

The World Bank has already identified climate resilience as a critical component of the country’s development agenda. Integrating environmental sustainability into economic planning will not only protect vulnerable communities but also create new opportunities in green industries, such as sustainable fisheries, renewable energy, and eco-tourism. Investing in these areas can generate long-term economic benefits and protect the country’s natural resources.

7. Leveraging International Partnerships and Aid

Solomon Islands can also benefit from strategic international partnerships and aid programs that support its economic development. Donor countries and organizations, such as the World Bank, Asian Development Bank (ADB), and regional partners like Australia and New Zealand, provide both financial and technical assistance to support growth initiatives. These partnerships can help fund infrastructure projects, support capacity building, and provide technical expertise for improving public sector governance and private sector development.

Furthermore, the Solomon Islands should continue to engage in regional economic cooperation initiatives, such as the Pacific Agreement on Closer Economic Relations Plus (PACER Plus) and other trade agreements, to enhance market access and promote trade diversification.

Conclusion: A Positive Outlook Requires Strategic Action

The World Bank’s projection that Solomon Islands will experience accelerated economic growth in 2025 offers a promising outlook for the country’s future. However, to fully realize this growth, the government and key stakeholders must take deliberate and coordinated actions. Prioritizing infrastructure development, diversifying the economy, investing in human capital, strengthening public governance, and building climate resilience are critical steps to unlocking the country’s growth potential.

If these initiatives are successfully implemented, Solomon Islands can create a more inclusive, resilient, and prosperous economy, benefiting its citizens and positioning itself for long-term sustainable development. The future is bright for the Solomon Islands, but it requires strategic vision and determined effort to turn these projections into reality.

And finally, it might be advisable for the Government to establish a macroeconomic advisory Committee to advise the Government through the Ministry of Finance on what needs to happen in terms of macroeconomic policy requirements that will drive the economy, building on the positive projections made by the World Bank.

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