Solomon Islands is facing a - 4.9 GDP decline this year.
Prime Minister Manasseh Sogavare said in Honiara today, Thursday, that first-round of the Economic Stimulus Package of SBD309 million is part of his government’s efforts to dampen the impact of the coronavirus pandemic, especially the immediate impacts to ease the fallout of the pandemic on businesses and the general population and to keep the economy afloat.
He said the package initiative falls under the second phase of the government response which is crucially important to dampen the negative impact of the Covid-19 pandemic on the economy.
Some observers have reportedly claimed the success of the economic stimulus plan will depend on how it is executed - how well programs are rolled out at the operational level.
How far is the “fallout” likely to go and with what impact?
According to the International Monetary Fund (IMF) world-wide domestic product will shrink by 3.0 percent this year.
At home, Prime Minister Sogavare has already said preliminary predictions from the Central Bank of the Solomon Islands (CBSI) and the Ministry of Finance indicate that Covid-19 is "likely to have a considerable negative impact on the Solomon Islands economy."
In his speech this week, when launching the government’s economic stimulus plan, the PM said the country was heading towards a recession in the second half of 2020.
Here is an outline of what Prime Minister Sogavare said.
"A significant decline in GDP growth is expected to decline further to negative 4.9 percent in 2020 as a result of reduction in logging and fisheries exports, a contraction in tourism, as well as the negative impact of containment measures that include suspension of all international flights, entry restrictions of non-citizens and strict mandatory quarantine for all returning passengers.
"The forestry sector expects an 11% decline in log output, 9% fall in foreign exchange receipts and a 6% drop in government revenue from duties on logs. With nearly half of the Solomon Islands workforce thought to be directly or indirectly associated with the logging sector, the economic impacts will reverberate across all parts of the country.
“The tourism sector is also being hit hard with tourism operators in Honiara predicting a 10% occupancy rate for April, and the predictions for May and beyond are expected to be lower.
"This all points to a dire prospect for the national economy through business closures, loss of jobs, pressure on government revenues, and a serious contraction in aggregate demand.”
There is likely to be the need for considerable belt tightening in the months ahead and a good deal of initiative, self sacrifice - and national unity - as I judge the seriousness of the situation, and especially when the country is faced with the twin enemies of climate change and Covid-19 - both unpredictable and equally capable of deadly consequences.
It is to be hoped Solomon Islands development partners will help to alleviate the plight of the people with appropriate support measures, including financial assistance towards the SIG’s economic sustainability initiatives to-date.