Solomon Islands - Economy

Overview: Solomon Islands’ economy is based on agriculture, forestry and fisheries, which together account for around 40% of GDP and provide employment for the majority of the population. GDP grew by 6.4% p.a. 1979–89.

Agricultural resources are limited; only 35% of the land is suitable for cultivation and pressure on land is leading to soil impoverishment. Production can be affected by tropical storms.

During the 1990s fishing was a developing industry, encouraged by the declaration of a 320-km exclusive maritime zone. Forestry also contributed strongly, providing the dominant export product. The government was working with export partners and CDC Capital Partners to halt the depletion of forests.

Although public expenditure remained high, resulting in budget deficits and growth of public debt, economic growth was consistently good in the 1980s and 1990s until 1997 when the economy went into recession, due largely to the impact of the Asian economic downturn and consequent falls in export revenues. An economic reform programme was launched in early 1998 with the emphasis on public-spending cuts.

Recovery began in 1998–99, but was soon reversed as political unrest intensified: plant and equipment, along with infrastructure, were damaged; the gold mine at Gold Ridge was closed; and the economy collapsed, shrinking by 14% in 2000, 9% in 2001 and 2.4% in 2002, when the government was depending on aid to finance both the peace agreement (including economic development of the island of Malaita) and the budget.

After six years of recession the economy returned to vigorous growth in 2003. Strong growth continued in 2004 (8.0%), 2005 (5.0%), 2006 (6.0%) and 2007 (5.7%), with inflation remaining in single digits. But the economy remains relatively small and undiversified. In 2005, aid constituted two-thirds of GNI, the highest proportion in the Commonwealth; and during the 2000s logging has reportedly been pursued at an unsustainable rate.

Trade: Main exports are timber and logs, fish and fish products, and cocoa. Main imports are machinery, transport equipment, manufactured goods, food, fuels and chemicals. Main export partners are China (28%), South Korea, Thailand and Japan; main import partners are Australia (25%) and Singapore.