Economic growth in the Solomon Islands moderated but remained strong in 2012, driven by ramped up mining activity. Further moderation in growth is expected over the next 2 years as forestry resources dwindle. To offset the decline of logging, the country needs to further develop other industries and revenue sources, as well as control the growth of government expenditure.

Economic performance

Growth slowed to 5.5% in 2012, from 10.6% in the previous year. The deceleration mainly reflected a much smaller increase in forestry sector output than in recent years. Logging provides 16% of output but, having reached record levels, grew by only 0.5% in 2012, compared with annual increases of around 36% in the previous 2 years. Agricultural output fell in 2012 with the production of cocoa falling by 33% and copra by 19% because of sluggish demand overseas. Palm oil and fisheries recorded small increases in production.

Industry (mostly mining, manufacturing, and construction) and services (mostly trade, transport, and communications) drove growth in 2012. Gold production from the Gold Ridge mine ramped up, and exports were 2.4 times higher in 2012 than in 2011. Solomon Islands’ hosting of the Festival of Pacific Arts and higher foreign direct investment helped fuel growth outside of mining.

Source: ADB estimates.

Economic prospects

Growth is expected to slow further, to 4%, in 2013. Although agricultural production and gold output are projected to increase, log production is seen to decline. A scaling up of gold mining is expected as the Gold Ridge mine reaches full production capacity of 95,000 ounces per year, up from 79,400 ounces in 2012.

The Regional Assistance Mission to Solomon Islands will start to wind down in 2013 and thereafter focus largely on building the capacity of the Royal Solomon Islands Police Force. The mission’s military component will be withdrawn from mid-2013 as the country transitions from post-conflict and crisis recovery to sustainable development based on the National Development Strategy, 2011-2020. The mission has also been a major development partner, but the effect of withdrawal on the economy will be minimized by transferring its development activities to the programs of other development partners, in particular Australia and New Zealand.

In 2014, growth is projected to remain at 4% with continued investment in mining and its spillover effects on the economy. Additional investment in telecommunications is expected to harness opportunities created by the broadband project.

Source: ADB. 2013. Asian Development Outlook 2013. Manila.

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