Slight growth for our economy - Solomon Star News

Slight growth for our economy

03 April 2014

A slight pickup in economic growth is being forecasted for Solomon Islands this year (2014) from 2.9 percent in 2013 to 3.0 percent.

Thats according to the Asian Development Bank (ABD) flagship economic report, the Asian Development Outlook (ADO) which was released early this week.

The report said growth is expected to pick up slightly, to 3.0 percent in 2014.

The growth is expected to be pushed by agriculture and gold production as log drops.

“Agricultural production and gold output are projected to increase and offset declining log production as forest resources dwindle.

“Gold mining is expected to scale up as the Gold Ridge mine moves towards full production capacity of 95,000 ounces per year, well above the production of 57,400 ounces in 2013.

“The recovery in agriculture output in the second half of 2013 is predicted to continue in 2014.”

The report highlighted that next year, growth is projected to hold steady at 3.0 percent, driven by fiscal stimulus from investment projects and their spill-over effects on the economy.

“Modest increases in gold production are also expected as planned improvements in production processes are implemented.”

Logging is expected to continue to decline in the medium term at an average annual rate of 8.0%.

“Inflation is expected to moderate slightly in 2014, falling to an average annual rate of 5.5 percent as the inflationary impact of poor weather in mid-2013 dissipates. Reflecting the country’s modest growth expectations and continued declines in import prices, inflation is expected to moderate further, to 5.0 percent in 2015.”

The bank also highlighted that a balanced budget is planned for 2014, but its achievement appears uncertain.

“The target assumes a 7.2 percent increase in recurrent revenue, but this will depend upon stronger economic growth and improvements in revenue administration and compliance.”

The report also attributed the upcoming national general election later this year and the terminal grant for members of parliament once they leave office two major costs that will increase expenditure.

“In 2014, some increase in expenditure is expected to cover the 2014 election, including one-time grants worth more than $50,000 to politicians upon their leaving office,” the report added.

“The government has decided to reduce constituency and discretionary funding for members of parliament by one-third in 2014 to offset expected election costs, but this is one area where expenditures could exceed estimates.”

Tertiary education in the area of scholarship is another expenditure that will affect the country’s revenue.

Scholarships have exceeded the budget in recent years, the report noted.

The report added that the central bank is expected to continue to soak up excess liquidity by selling short-term bills as credit growth recovers from the lows of recent years.

“Over time, the effects of the central bank’s use of a currency basket rather than a peg to the US dollar should become more pronounced, and the Solomon Islands dollar can be expected to track more closely the movements of the currencies of its major trading partners, particularly Australia.”