WB study warns “without reform SI unlikely to achieve upper-middle-income status by 2050

Sponsored Advertisement

A World Bank study launched today clearly warns that without reform, Solomon Islands is unlikely to achieve upper-middle-income status by 2050. It will instead only reach the current level where Vanuatu is now in 2050.

The World Bank’s Economic Memorandum/Sources of Growth Study of Solomon Islands study in partnership with the Ministry of Finance and Treasury outlines the development constraints and identifies possible solutions to the constraints.

The report said assuming historical growth fundamentals continue, GDP growth averages 3.2 percent over the period 2024–2050, yielding a gross national income (GNI) per capita of US$3,160 by 2050, well below the upper-middle-income threshold of US$4,465.

“In this scenario, the country benefits neither from large productivity gains nor from sizeable investment accelerations. It is clear that without sustained reform and tapping into new sources of growth, Solomon Islands will not achieve the growth objective laid out in the National Development Strategy 2016–2035 (NDS) (i.e., 5 percent GDP growth by 2025 and 7 percent by 2030 and beyond).

The study found that the country’s historical growth driver, the logging sector, is in rapid decline, stressing the urgent need to unlock new sources of growth.

It further finds that Solomon Islands faces both cross-cutting and sectoral growth constraints. The economic geography constraints are further amplified by poor quality roads and maritime infrastructure, irregular shipping services, and limited digitalization. Furthermore, the rapid but uncontrolled migration to Honiara has delivered few economic benefits and places stress on residents and services. Private sector growth is limited due to land use issues, labor market skills shortages, and a lack of access to finance and affordable energy.

In the Agriculture sector, the study says that elevated cost of finance; poor infrastructure; lack of mechanization; low coverage of extension services; challenges in land use; high utility prices; difficulties in trading within and across borders; low aspirations and limited skills; climate change.

In the fisheries sector, it identifies inefficient cold chains; poor transport links and lack of information.

In tourism, it points to infrastructure gaps including transportation, accommodation and other facilities; weak tourism governance and costly business environment; difficulties accessing land, finance, and skilled labor.

 However, the bank says a comprehensive and ambitious reform effort could lift economic growth in the Solomon Islands, helping the country overcome pressing development challenges and propelling it toward its goal of upper-middle income status by 2040.

The World Bank report recommends reforms and investments to overcome economic geography constraints, stimulate private sector investment, and unlock new sources of economic growth. Priority areas include improving transport and digital connectivity, better urban planning, reducing barriers to trade in services, improving access to finance, steps to lower electricity prices, strengthening land administration systems, investments in agriculture, fisheries, and tourism, and increasing labor mobility through better education and training.