HONIARA, February 4, 2013 – After several years of relatively strong economic growth, the outlook for the coming years is for a slower expansion, participants at a joint World Bank and the Economics Association of Solomon Islands (EASI) public seminar heard today (Monday).
Slower growth will place pressure on government spending, and underlies the importance of the government’s efforts to strengthen its budget preparation and consultations.
World Bank Country Economist Tim Bulman presented on economic conditions in recent years, and the immediate outlook. He noted that the economy grew by about 5½ percent in 2012, still strong but slower than the rates achieved since the economic crisis of 2009.
Seminar participants heard the growth in 2012 was narrowly-based. Excluding logging and the ramp-up of production at the Gold Ridge mine, output grew by about 3½ percent in 2012. As the population grows by around 2¼ percent each year, this means output per person expanded by only around 1¼ percent.
Bulman however noted that for most countries in our region, 2012 was better than had been expected, and many of the downside risks to the global economy were not realized.
“Solomon Islands has taken advantage of these positive surprises to rebuild its buffers, by building up foreign exchange reserves and the government’s cash reserves. Maintaining these buffers offer the best protection for when conditions turn bad.”
He said that the outlook was for growth to moderate further in 2013, as logging and the start of production at Gold Ridge stop contributing to growth.
World Bank Public Expenditures Economist, Jhelum Tini Chattergee also presented on the key features of the 2013 budget.
The seminar heard that slower economic growth will place greater pressure on the government to spend its budget well, and that after several years of spending less than the full budget, the government returned to fully disbursing the funds available to it in 2012, and plans to do the same in 2013. Seminar participants saw that the government has been increasing its allocation to the key social sectors, of education and health, and has also expanded its allocation to the development budget.
Norman Hiropuhi, incoming Director of the Public Expenditure Analysis section in the Ministry of Finance and Treasury presented on efforts government is taking to address these issues and to improve the quality of spending by making the budget a more effective planning document.
Seminar participants heard that for the first time, the Ministry of Finance sat jointly with the Ministry of Development Planning and each of the ministries responsible for providing public services to Solomon Islanders, and discussed their budget plans and priorities.
The Ministry of Finance and Treasury is now regularly consulting with civil society and Provincial governments across Solomon Islands on their priorities. The inputs from these consultations would inform the selection of successful bids and is summarized for Cabinet when they consider the budget.
Incoming World Bank Country Representative to Solomon Islands Anne Tully congratulated the government on these efforts to strengthen consultation and increase transparency around the use of public resources and thanked the Economics Association of Solomon Islands for promoting dialogue on a very important topic for Solomon Islands future.
President of EASI, Michael Wate welcomed the ongoing partnership with the World Bank.
“This partnership with the World Bank in discussing economic issues and economic policies contributes positively to EASI objectives as well as allows local member economist or development practitiones and interested non -members to continue to invest in their intellectual capital by attending these seminars,” Wate told participants.
The seminar attracted great turnout from members of the Economics Association, and the public who showed tremendous interest in the topics, with questions and discussions continuing into the evening. EASI is planning on hosting its next public seminar in March, following its Annual General Meeting.