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Economic growth moderated in 2013 as forestry, agriculture, and mining declined. A slight pickup in growth is forecast for 2014, but rapid population growth will rule out much improvement in gross domestic product (GDP) per capita. Slower growth in recent years has placed pressure on the government budget and reinforced the need to control government expenditure and improve its quality to meet the needs of an expanding population.
Growth slowed to 2.9% in 2013 from 4.8% in the previous year. This weak outcome, which reflected mainly declines in earnings from gold and agriculture, only slightly outpaced population growth at 2.5%. The value of gold production fell by 15% in 2013, mainly because gold prices were lower and the gold processing plant underwent major refurbishment. Agricultural production fell in 2013, with most agricultural commodities recording output declines because of poor weather in the first half of the year and lower prices.
Logging fell by 3.0% because of weather and prices but still recorded the country’s third-largest annual harvest. This rate of extraction, and its heavy reliance on logging previously harvested forests, appears unsustainable, such that production is expected to continue to contract as forest stocks decline.
Growth in 2013 was driven by expansion in construction, manufacturing, and services. In particular, investment in the Gold Ridge mine and expanded production at the Noro tuna-processing factory boosted growth.
|Selected Economic Indicators (%) - Solomon Islands||2014||2015|
|Current Account Balance (share of GDP)||-6.0||-10.0|
Source: ADB estimates.
Growth is expected to pick up slightly, to 3.0%, in 2014. 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 toward 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.
In 2015, growth is projected to hold steady at 3.0%, driven by fiscal stimulus from investment projects and their spillover 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%.
Source: ADB. 2014. Asian Development Outlook 2014. Manila.