Solomon Islands expected to moderate to 3% in 2017

The new Asian Development Outlook (ADO) 2017, ADB’s flagship annual economic report, notes that gross domestic product (GDP) growth in the Pacific nation accelerated to 3.2% in 2016, but will likely moderate as the short-term benefits of expansionary fiscal policy and unsustainable logging dissipate.

“Growth has been broadly steady, but in the absence of more sustainable drivers, it will slow over the medium term,” said Roland Rajah, Senior Economist at ADB’s Pacific Liaison and Coordination Office. “Infrastructure investment, better expenditure management, and implementation of the National Tourism Development Strategy would help generate more sustainable growth.”

The report notes new economic drivers are urgently needed to replace logging and external assistance — both of which are expected to decline over the medium term.

Tourism offers a new driver for growth, as Solomon Islands is widely considered to have world class tourism potential. Continued implementation of the government’s tourism strategy should help to unlock the country’s tourism potential and gradually provide a more sustainable source of growth.

Rising international commodity prices will push inflation higher but it should nonetheless remain relatively subdued at 1.8% in 2017 and 2.2% in 2018. The current account deficit widened significantly to 7.3% of GDP in 2016 and is expected to widen further to reach 10.7% of GDP in 2018 amid high import needs for large planned investment projects, including the Tina River Hydropower Project.

ADB recently boosted its field presence in the country by opening a new Extended Mission in the Solomon Islands. The office assists the government in implementing its National Development Strategy 2016-2035 through activities outlined in ADB's Pacific Approach.

Since 1973, ADB has provided around USD234 million in assistance to the Solomon Islands comprised of 20 sovereign loans, as well as 14 grants and technical assistance amounting to USD21.6 million. In addition to direct funding, ADB has also mobilized cofinancing for the country amounting to USD125 million for 10 investment projects, and USD9.6 million for 13 technical assistance projects./.