Solomon Island experiences slight downgrade in economic growth
By LACHLAN EDDIE
The Solomon Islands economy is experiencing a slight downgrade in economic growth, according to the World Bank’s latest assessment.
World Bank Country Economist, Lodewijk Smets confirmed the economic outlook during an interview with local media at the World Bank Office in Honiara on Tuesday.
Ralph Van Doorn, Ekaterine Vashakmadze, Helle Buchhave and Lodewijk Smets with the launch publication.
The interview followed the launch of the World Bank’s fifth Pacific Economic Update (PEU) publication, titled “Employment Women, Empower the Pacific: A Strategy for Uncertain Times.”
“In Solomon Islands, there is a slight downgrade in economic growth, but it’s broadly in line with what we looked at and projected last year,” Smets said.
Despite the growth concerns, Smets delivered positive news regarding the country’s debt situation. The Solomon Islands’ risk of external debt distress has been downgraded from moderate to low compared to last year.
“We had a discussion on the heat map where Solomon Islands now shows a low risk of external debt distress. This means there is an opportunity—a window of opportunity to invest—while at the same time it’s important to maintain debt and fiscal sustainability,” he explained.
To address debt sustainability concerns, Smets referenced a World Bank report emphasizing the importance of investing in infrastructure and productive sectors.
He noted that when government spending exceeds revenue, a fiscal deficit occurs, necessitating borrowing. The World Bank is comparing the current fiscal deficit with pre-pandemic levels from 2018-2019, though Smets cautioned that those years were a typical for Solomon Islands due to a slight surplus from increased logging revenues.
“The key is to control and ensure that public debt levels are sustainable, and that borrowing is actually for productive purposes,” Smets said.
“If the government borrows to invest in roads and infrastructure, that can drive economic growth.”
The World Bank’s assessment suggests that while Solomon Islands faces some economic headwinds, the improved debt risk profile provides opportunities for strategic investment in growth-driving infrastructure projects.
The launching was attended by the following World Bank staff and where they come from: Ralph Van Doorn, Lead Economist Pacific (Sydney, Australia), Ekaterine Vashakmadze, Senior Economist at the World Bank (Bangkok, Thailand), Helle Buchhave, World Bank Senior Social Development Specialists (U.S), Lodewijk Smets, Country Economist (Solomon Islands) and other World Bank staff.
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