Solomon Islands: Economy

The economy of Solomon Islands contracted in 2014 after disruptive flooding in April. Growth is expected to pick up in 2015 on flood-recovery spending and in 2016 on increased foreign investment, though the medium-term outlook for mining and forestry is uncertain. A new government elected in December 2014 faces a challenging budget outlook. A priority is to promote financial inclusion to generate inclusive growth and economic opportunity, particularly in rural areas.

Selected Economic Indicators (%) - Solomon Islands 2015 2016
GDP Growth 3.0 3.5
Inflation 5.0 5.5
Current Account Balance (share of GDP) -15.5 -15.0

Source: ADB estimates.

Economic performance

Floods in April caused the gross domestic product (GDP) to contract by 0.2% in 2014, with per capita GDP falling by 2.4%. Gold production ceased, and damage to businesses, houses, and public infrastructure was widespread. Private enterprise and public services were heavily affected. Damage was centered in and around Honiara, the capital, where dozens of people were killed, more than 10,000 were displaced, and 52,000 were affected in other ways. The government estimated damage and losses from the flooding at $108 million, or 9% of GDP.

Economic prospects

Growth is expected to rebound to 3.0% in 2015, driven by spending on flood reconstruction and continued recovery in agriculture, and despite projected declines in gold and forestry output.

In 2016, growth is projected to pick up further to 3.5%, driven by fiscal stimulus from investment projects and their spillover into the broader economy. Increased investment in telecommunications and spending to develop large nickel deposits in Isabel Province are also expected to strengthen growth next year.

Excerpted from the Asian Development Outlook 2015.