This will result in a negative (-) 4.1 percent economic growth by the end of this year.
This was highlighted by the Minister of Finance and Treasury Harry Kuma during the second recording of the 2020 Supplementary Appropriation Bill in Parliament yesterday.
He told parliament that the pandemic in the last seven months has left the healthcare system in desperation and hurting many economies.
“The economic damage represents the largest shock ever experienced in decades.
“The global growth is projected to grow at -4.9 percent for 2020, with 5.4 percent expected growth in 2021,” he said.
He said as a small open economy, the country is more vulnerable to any contractions or disruptions experienced by the global economy.
He told parliament the country’s real Gross Domestic Product (GDP) is forecasted to grow at -4.1 percent by the end of 2020 (midyear revision) from the original projection of 2.3 percent in 2020.
In his speech, he highlighted a number of sectors that are expected to contract severely.
- The tourism sector, which expected to record a significant drop in tourism activity this year, by around 60 percent. Tourism is unlikely to return to pre-COVID- levels until beyond 2021 and this will be highly dependent on the COVID-19 outlook.
- The fisheries sector, fishing activities have decreased in both the formal and informal sectors during the pandemic. According to the commodity production data, fish catch has fallen by 53 percent as at the end of June 2020. Due to the low fish catch performance to date, the fisheries sector is projected to decline by 8.6 percent in 2020. The containment measures such as mandatory quarantining have also impacted fisheries production early in the year.
- Logging sector, logging activities continue to be one of the key export commodities despite its contributions to growth which is expected to steadily decline over the medium term as log exports move to sustainable levels. So far this year, SI has experienced a 7.1 percent drop off in log shipments, despite log output is on par with the same period last year (first half of 2019). While performing stronger than initially expected with the outbreak of COVID-19, there continues to heighten uncertainty about the impacts on trade for the second half of 2020. The total volume of log exports for 2020 is expected to be contained to around 1.95 million cubic meters.
- Business activities and service output is expected to drop by -1.7 percent in 2020. This is primarily due to transport and tourism services which are affected by flight disruptions and the expected fall in travelers’ numbers. Firms are cutting back on business activities and investment due to a fall in domestic demand for goods and services, interruptions on supplies, and an uncertain outlook on future earnings.
- The construction sector is expected to decline significantly by around -8.9 percent in 2020. The SI construction sector is predicted to continue experiencing some difficulties with disruptions in the supply of material. Even though the Solomon Islands at this stage maintains a zero confirmed case of COVID-19, a large number of major construction projects have stalled, or been delayed due to the disruptions. Many planned capital works and infrastructure projects have been delayed until 2021, as mobilization of technical expertise is constrained in the current environment.
- The new trading environment or “new normal” created by the pandemic has left many manufacturers with uncertainty. So far, the effects have largely been felt by business with very lean supply chains, but deeper systemic disruption may yet emerge. Manufacturing is expected to decrease by around 12.2 percent in 2020, with key manufacturers facing depressed operational issues including reducing their staff numbers as business activities have been strained.
- An upside for Solomon Islands fish processing is on the strong local management and because of sustained efforts on cost-saving, and on ensuring greater efficiency and customer satisfaction. The other fish processing facilities in the region, on the other hand, have had to close due to expatriate repatriation. Solomon Islands' processing has not been impacted in this way.
- The agriculture sector is projected to have moderate growth of around 2.1 percent in 2020, primarily owed to the informal sector. The informal sector is expected to offset any formal sector contractions as global demand declines and commodity price volatility increases.
- Despite the general fall in growth, COVID 19 pandemic has so far not impacted our agriculture exports as much as initially expected. The volume of most export agricultural commodities has only slightly declined during the second quarter of this year.
- On copra, although exports are more than 70 percent greater than the same period last year (year to June), export volumes are still at recent lows. The COVID-19 shock has caused difficulties in the timely marketing and sale of agricultural produce. Lockdowns in-country have seen a change to the value chain with farmers now selling directly to the consumer.
- On the upside crude palm oil has increased by 11 percent compared to quarter one.
In his closing remarks, he highlighted the country’s fiscal outlook is uncertain since the government is not sure when the COVID 19 will be contained,
But, I am certain that we have responded decisively and responsibly to the outbreak of the COVID 19 Pandemic by resourcing the approved COVID 19 preparedness and response plans.
“During these unprecedented times, let us not be sidelined by our own ignorance and divided by anxiety and fear but let us show our solidarity and rally towards a common goal to protect our international borders, protect our health and the wellbeing of our people,” he said.
He assured the nation that government and political leadership is doing its best to address this abnormal situation. “I am, therefore, appealing to all citizens of our beloved country, chiefs, church and community leaders, NGOs and civil society organizations, premiers and members of provincial assemblies, public servants and the general populace of Solomon Islands to support the government in this fight against our common enemy, the COVID 19 and to also adhere to regulations and protocols established to manage the current situation,” he said.
BY MOFFAT MAMU