The growth forecast for 2013 is lowered to 2.5% from the Asian Development Outlook (ADO) 2013 forecast of 4.0% in April, largely reflecting slowdowns in gold, logging, and agricultural production. In the first 7 months of 2013, gold exports were down by 22.9% and log exports by 11.6% compared with the same period in 2012. The Gold Ridge mine operator has cut its forecast for gold production in 2013 by 10%. Agricultural and fishery production were also down in the first 7 months of the year, with production of cocoa declining by 23.5%, and of copra by 63.0%, year on year. The fishing catch was 28.5% lower due to poor weather and fewer fishing vessels.
|Selected Economic Indicators (%) - Solomon Islands||2013||2014|
|ADO 2013||Update||ADO 2013||Update|
|Current Account Balance (share of GDP)||-10.0||-10.0||-10.0||-10.0|
Source: Asian Development Outlook (ADO) 2013 Update; ADB estimates.
Outside these sectors, recurrent government spending increased in the first quarter by 24.5% year on year. The continued growth in manufacturing output, up in the first quarter by 45.0% year on year, reflected both increased purchases of locally manufactured goods and higher exports of canned tuna. Construction related to the expansion of the telecommunication network is expected to boost growth this year and to spill over into 2014 as the submarine cable project commences.
The outlook for 2014 remains positive. Strong construction activity and a rebound in gold and agricultural production are expected to contribute to higher growth. The forecast of 4.0% for 2014 is maintained as these developments were foreseen in ADO 2013.
Inflation in 2013 is now expected to rise to 5.5%, up from the ADO 2013 forecast of 4.5%, as inflation in the first half of the year was 6.2%, which was higher than expected. This reflected higher prices across all major expenditure categories: food and beverage, tobacco, housing, and utilities. Inflation is expected to slow to 4.0% in 2014, as the lagged effects of higher fuel and food prices dissipate.
The country posted a current account deficit equal to 1.8% of GDP in the first quarter of 2013, largely due to lower export earnings. Forecasts of current account deficits are maintained from ADO 2013, at 10% of GDP in 2013 and 2014, in line with expectations of continued weakness in exports, a moderate rise in import payments, and sustained aid flows.
Source: ADB. 2013. Asian Development Outlook 2013 Update. Manila.