World Bank Highlights Urgent Need for Economic Reform in Solomon Islands to Drive New Sources of Growth

Research shows reform could drive country to upper-middle income status by 2040

HONIARA, September 18, 2024 - A comprehensive and ambitious reform effort could lift economic growth in the Solomon Islands, helping the country overcome pressing development challenges and propelling it toward its goal of upper-middle income status by 2040, according to a new World Bank report.

The Country Economic Memorandum/Sources of Growth Study launched today in partnership with the Ministry of Finance and Treasury, emphasizes opportunities to boost growth through digitalization, improved transport connectivity, and better urban planning, alongside steps to stimulate private-sector investment in tourism, agriculture, and fisheries.

"This analysis is crucial in recognizing the challenges Solomon Islands faces, but more importantly, it highlights opportunities to drive change," said Stephen N. Ndegwa, World Bank Country Director for Papua New Guinea and the Pacific. "By addressing these issues, the government can create a stronger, more resilient economy that benefits all Solomon Islanders.The World Bank remains committed to supporting these efforts and helping the country realize its full potential."

Manasseh Sogavare, Solomon Islands' Minister of Finance acknowledged the challenges while expressing a commitment to the necessary reforms. "The findings of this report underscore the importance of reforming our economic policies. We are committed to taking the necessary steps to diversify our economy, improve infrastructure, and support the private sector. These efforts are vital to securing a better future for our people."

Solomon Islands faces a pressing need to find new sources of economic growth to offset the decline in its forestry industry, a traditional driver of growth. Outside logging, however, most other sectors are underdeveloped, partly due to the country's relatively small economy, scattered population, limited government resources, and challenging business environment. The report warns that without reforms, Solomon Islands is unlikely to meet its growth goals or reach upper-middle-income status by 2050.

The World Bank report recommends reforms and investments to overcome economic geography constraints, stimulate private sector investment, and unlock new sources of economic growth. Priority areas include improving transport and digital connectivity, better urban planning, reducing barriers to trade in services, improving access to finance, steps to lower electricity prices, strengthening land administration systems, investments in agriculture, fisheries, and tourism, and increasing labor mobility through better education and training.

This research provides new insights into Solomon Islands' current economic headwinds. However it highlights that with targeted reforms and strategic investments, the government can address these challenges and work toward a more resilient economy.