Asia and Oceania

Solomon Islands
Last reviewed: 09 October 2009

Country information

See entire profile

Economy

Basic economic facts

Current economic indicators can be found on the website of the Central Bank of the Solomon Islands. However, both the Asian Development Bank and the International Monetary Fund have advised caution over the Solomon Islands Government’s own figures on the economy.

GDP real growth (2008) – 7.3% (IMF)
GDP per Capita (2008) IMF US$904
Population growth: IMF 2.8% HIES 4.4% (under dispute)
Inflation: 2008 18.2% (IMF) 16.5% (3 month average March 2009)(CBSI)
Gross external reserves: 22/07/09 USD $106m SBD $857m
Overall production rate Index: March 2009 103.9 (1994 = 100)
Major industries: Timber, fish, copra, palm oil, cocoa
Major trading partners: SI Export locations China, Thailand, Republic of Korea (UK 9th)
SI Import from: Australia, Singapore, Japan, (UK 14th)
Exchange rate: CBSI 22/07/09 £1 GBP = $13.28 SBD

Ethnic unrest and lawlessness severely damaged the Solomon Islands economy between 1999 and 2003 and, as a result, there has been little inward or outward investment. GDP fell significantly over this period and GDP per capita halved to below US$500. Export earnings fell by 80% to just US$34. The main cause of the economic decline was the destruction of the largest income earning activities (timber, palm oil, gold, fish processing and tourism). There was also extensive damage to personal property, transport infrastructure, schools, water supply and sanitation systems, government buildings and the health sector.

Currently around 80% of the population is supported through subsistence farming. The vast majority of the countries income derives from the export of primary goods and from development aid (for every two dollars the government spends, donors provide three).

Logging is the primary export. It accounts for around 60% of export earnings, constitutes 17% of the economy and provides 16% of government income.

Estimates vary, but present rates of logging look likely to exhaust commercially viable forest by 2014. The World Bank has identified a number of potential replacement sources for growth including Fish, Copra, Cocoa, Palm oil, Gold mining and tourism. But it seems clear that there will be a significant reduction in government revenue as a result.

NGO’s and donors are beginning to explore with government the potential for carbon credits to generate export earnings. This work is still constrained by the lack of a formal market for carbon trading – an issue which may be addressed at the UNFCCC in Copenhagen in December.

The advent of the Global Economic Crisis, has had a significant and detrimental impact on Government finances. Total revenue receipts are down by around 25%, there has been pressure on foreign exchange reserves (which fell to just 2.4 months import cover during May 2009 although this recovered to 4.2 months cover by July) and an ongoing cash squeeze. This has led to slight delays of payment to the government payroll. Donors, including the EU and World Bank, are in discussion with the Solomon Island government over whether (and how) they can offer budgetary support.

Climate Change

As a Least Developed Country (LDC) and a Small Island Developing State (SIDS) Solomon Islands is extremely vulnerable to the adverse effects of climate change. Rising sea levels rise is already causing significant damage to rural infrastructure including wharves and roads. Salt-water intrusion, as a result of King Tides, is affecting food security and heavier, more frequent and less predictable rainfall has caused flash floods and several deaths this year. The Government is, therefore, currently looking at options for the resettlement of parts of the population in particularly low lying areas. Given the constraints of the customary land system this is likely to be extremely challenging. In addition the commercial logging of Solomon Islands lowland rainforest is depleting world carbon stocks – and destroying bio-diversity.

The Ministry of Environment has formed a specialist Climate Change Division and is mainstreaming climate risk management into the work of the National Disaster Management Office. Solomon Islands is a member of the Association of Small Island States (AOSIS) grouping and it’s participation in the UNFCC process leading to Copenhagen in December is shaped by this membership. The Solomon Islands is, therefore, arguing that the Copenhagen Conference should agree to try and limit worldwide warming to a 1.5 degree target – in order to avoid catastrophic sea level rise.