Shock followed by growth, forecast for Solomons economy
A regional economist says the Solomon Islands economy is likely to suffer following last week's devastating floods, but growth should rebound in the medium term.
The Asian Development Bank says the Solomon Islands economy is likely to suffer following last week's devastating floods but growth should rebound in the medium term.
The ADB had earlier projected a slight pick up in growth to three percent for this year after last year's moderated growth due to lower earnings from logging, agriculture and mining.
A principal economist with the bank, Emma Veve, told Sally Round, it can take up to 18 months for a pick up in the economy following disaster.
EMMA VEVE: Certainly in the immediate aftermath of the disaster, there's a shock to the economy, a negative shock. You see a decline in agricultural production, you see job losses. Government needs to come in fairly quickly and start to provide food for people, help people start rebuilding homes. And over time the need for government expenditure starts to ramp up. I expect we'll see roads, bridges needing some rebuilding, and that expenditure actually in the longer term can promote some growth within the economy. So while it's a negative immediate impact, and government revenues fall off in a time where expenditure is expected to increase, in the medium term there's usually some growth benefits coming out of it.
SALLY ROUND: And when would you start to see that kick in?
EV: It really depends how long it takes the government to start to put together the investment projects needed. In some countries, it could be six months, or even a year, 18 months down the track.
SR: This is a significant shock for the Solomon Islands. What would it mean for its logging industry for instance?
EV: Look I haven't seen the details of what has been impacted, but certainly the logging industry is dependent on the port in Honiara to get product out of the country. It's also dependent on the roads to get to the ports, so depending on what the damage is, certainly its exports may be delayed. In the case of logs you can build up a stockpile of them and export later. So I would imagine they would be able to catch up. It's certainly very early days but our first step would be to get involved in an assessment mission and to get people there in-country, and work out just what are the impacts, and what are the needs and work with government through that process. We do have a small office in Honiara and I understand our staff there have already been working through this with government.
The next step is to work out in what way we can best help meet some of these needs. We are a development bank, so while we can provide some short-term immediate grant assistance in emergency situations, we are really much better placed to support the longer-term recovery of the economy. Rebuilding of infrastructure for example, should that be needed. And that's something that will come out over the next few days as we work out what the needs are and we talk with government about how they'd like us to assist. In any of our member countries, where there has been a disaster, we would sit down with government and talk to them about what our planned programme was, does that still make sense, is there something that is now more pressing. We would also look to see whether additional resources are needed to be brought to the country programme to help them in this time.
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