non-agricultural income during the period January-June 2021. Food insecurity re- SOLOMON Key conditions and mains prevalent, as more than two thirds of households had at least one episode of challenges ISLANDS food insecurity in the month leading up to the survey. Common coping strategies, Solomon Islands is a country with 700,000 such as reducing food consumption or sell- people dispersed across 90 inhabited is- ing assets, could make those households Table 1 2021 lands. The country faces large economic, further vulnerable. Population, million 0.7 development and governance challenges Strong and timely containment measures GDP, current US$ billion 1.6 shaped by its geographical dispersion, re- had been successful in preventing local GDP per capita, current US$ 2322.0 moteness to international markets, and transmission of the coronavirus until 2022, National Basic Needs Poverty Rate a 12.7 vulnerability to natural disasters. In ad- when a community outbreak rapidly b 104.3 dition to the socio-geographic character- spread through a largely unvaccinated pop- School enrollment, primary (% gross) b istics, capacity constraints, as well as a ulation. At the end of February 2022 about Life expectancy at birth, years 73.0 fragile political landscape pose a contin- 30 percent of the population had received at Total GHG Emissions (mtCO2e) 46.4 uous threat to sustainable development. least one dose. The country expects to re- Source: WDI, Macro Poverty Outlook, and official data. These challenges make the planning, de- open its borders in the second half of 2022. a/ Solomon Islands National Statistics Office. Most recent value (2013). livery and management of infrastructure b/ Most recent WDI value (2019). systems challenging and this has resulted in a large infrastructure gap. The need for economic diversification is urgent given Recent developments The economy is expected to shrink by economy’s over-reliance on the logging sector. The government’s attempt to find The economy was set to grow by 0.4 per- -2.9 percent in 2022, reflecting the neg- new sources of economic growth is con- cent in 2021. However, at the end of No- ative impact of the recent civil unrest strained by several impediments, includ- vember 2021, protests at the Parliament and widespread community transmis- ing limited human capital and an unfa- building escalated into looting and riot- sion of the coronavirus. These events vorable business environment. ing, causing severe damage and losses have broad-based economic impacts and Development challenges have been fur- to buildings and goods, estimated at 7 ther exacerbated by the COVID-19 pan- percent of GDP. The civil unrest, driven create pressure on the fiscal accounts. demic which caused a sharp economic by a complex web of local grievances Risks to the outlook include a further contraction and adversely affected peo- and a lack of economic opportunities, re- spread of the coronavirus, higher im- ple’s livelihoods. According to a mobile duced the economic growth rate by 0.3 ported inflation, a return of social un- phone survey collected from June to Au- percentage points in 2021 (to 0.1 percent), gust 2021, there is no sign of employ- with knock-on effects in 2022. This re- rest, and climate-related disasters. ment recovery. To the contrary, the sur- flects lower economic activity in the retail vey indicates a decline in the share of and wholesale sector, which accounted working individuals since the start of the for half of all the civil unrest damage. pandemic. More than half of all house- The fiscal deficit deteriorated to 5.4 percent holds experienced reductions in their of GDP in 2021. In the month of December FIGURE 1 Solomon Islands / Real GDP growth, actual, FIGURE 2 Solomon Islands / Fiscal balance pre-unrest trend and post-unrest forecast Percent Index US$ billion LCU Percent of GDP 8 160 6 6 6 140 4 5 4 120 2 4 2 100 0 3 0 80 -2 -2 60 2 -4 -4 40 1 -6 -6 Real GDP (post-unrest), % change 20 Real GDP (pre-unrest), Index (2013=100) (rhs) 0 -8 Real GDP (post-unrest), Index (2013=100) (rhs) 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 -8 0 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 Total expenditure Total revenue Fiscal balance (rhs) Source: World Bank staff estimates. Source: World Bank staff estimates. MPO 1 Apr 22 2021, the revenue loss due to riots is esti- represents a sharp deterioration compared by a further drawdown on the cash buffers mated at 0.6 percent of GDP. In response, to the pre-unrest projection for 2022 (4.5 per- and a combination of domestic and exter- the government introduced austerity mea- cent growth). Investments to replace dam- nal lending. An expected rebound of eco- sures limiting payments to payroll, essen- aged productive capacity caused by the ri- nomic activity and spending consolidation tial items and COVID-19 related expendi- ots are unlikely to gain pace until later in the will lead to a narrowing of the fiscal deficit tures, though this only partially offset the year. Furthermore, the lockdown to contain in 2023-2024. Similarly, the current account revenue loss. The remaining fiscal gap in COVID-19 is likely to dent output in con- deficit will shrink over the medium term 2021 was financed by a reduction in cash tact-intensive sectors, including services, reflecting smaller fiscal deficit and reduc- buffers, which stood 3 percent of GDP at which represents about 55 percent of out- tion in construction-related imports. the end of 2021. put. Following a contraction in 2022, COVID-19 remains a major risk to the eco- The current account deficit widened to 5.2 growth is projected to rebound to 5.3 per- nomic outlook. A low vaccination in- percent of GDP in 2021, reflecting a large cent of GDP in 2023 and to moderate to 3.8 take—particularly among low-educated trade deficit which was partially offset by percent in 2024. Infrastructure investment, and female populations— may lead to the current transfers. The trade deficit was a return of business tourism and increased maintenance of a closed border policy, mainly driven by an increase in imports of mining activity are expected to support while a further community transmission machineries, fuel and basic manufactures growth over the medium-term. may have human capital implications and and export of fish and agricultural prod- The deficit in both external and fiscal ac- hamper economic recovery. The Russia- ucts, as well as minerals. counts will widen in 2022, to 18.3 per- Ukraine war may lead to sustained high cent and 7.7 percent of GDP, respectively. commodity prices – especially fuel, which High demand for imported construction would have inflationary effects and nega- materials and machinery will drive cur- tive implications on the external accounts Outlook rent account deficit. A combination of (refined petroleum constitutes 20 percent of lower economic activity and elevated imports). A further deterioration of domes- Output is projected to contract by 2.9 per- spending on COVID-response and busi- tic economic conditions may lead to a return cent in 2022, reflecting the impact of the ness recovery will increase the fiscal of social unrest, while natural disasters re- civil unrest and COVID-19 lockdown. This deficit. The deficit, in turn, will be financed main a significant risk for Solomon Islands. TABLE 2 Solomon Islands / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2019 2020 2021e 2022f 2023f 2024f Real GDP growth, at constant market prices 1.2 -4.3 0.1 -2.9 5.3 3.8 Real GDP growth, at constant factor prices 1.3 -4.3 0.1 -2.9 5.3 3.8 Agriculture -4.4 -2.3 -0.6 -6.6 2.2 -1.2 Industry 6.3 -12.7 6.8 -1.9 18.7 17.7 Services 2.8 -2.7 -1.4 -1.4 2.9 1.5 Inflation (Consumer Price Index) 1.6 3.0 -0.2 8.8 3.5 3.5 Current Account Balance (% of GDP) -9.8 -1.6 -5.2 -18.3 -17.7 -14.0 Net Foreign Direct Investment (% of GDP) -1.8 -0.4 -1.5 -2.9 -3.1 -2.8 Fiscal Balance (% of GDP) 0.7 -4.9 -5.4 -7.7 -4.9 -4.5 Debt (% of GDP) 8.3 14.0 20.6 23.7 25.6 26.8 Primary Balance (% of GDP) 1.2 -4.2 -5.1 -7.3 -4.4 -4.0 GHG emissions growth (mtCO2e) 0.0 0.0 0.0 0.1 0.1 0.1 Energy related GHG emissions (% of total) 0.9 0.9 0.9 0.9 0.9 1.0 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. MPO 2 Apr 22