INFLATION in the Solomon Islands is projected to ease to 3.7 percent in 2024 and further decline to 3.3 percent in 2025, according to the newly released World Bank Pacific Economic Update launched yesterday in Suva, Fiji.
The report, titled Diminishing Growth amid Global Uncertainty: Ramping Up Investment in the Pacific, highlights the need for significant investment to address the region’s slowing economic growth.
It stresses the importance of targeted investment to create jobs, improve infrastructure, and enhance resilience against climate change in the face of global uncertainties.
Inflation refers to the rate at which prices increase over a given period. It is often measured by the overall rise in prices or the cost of living within a country.
World Bank Senior Economist for the Macroeconomics, Trade, and Investment Global Practice for Solomon Islands and Vanuatu, Lodewijk Smets explained in an interview with local media that inflation spiked significantly during the COVID-19 pandemic.
“Prices rose sharply, and a key factor for the Solomon Islands and other Pacific Island countries is that we import inflation, mainly from Australia and New Zealand,” he said.
“So, we are not just importing goods but also inflation,” Mr Smets added.
Mr Smets said inflation can particularly affect the poor, adding that, “if your income doesn’t rise with inflation, your $100 SBD will buy fewer goods.”
Fortunately, inflation is now trending downward, though prices continue to rise—albeit at a slower pace than two years ago.
Mr Smets added that an inflation rate between 0 percent and 5 percent is manageable for the economy.
“A gradual increase in prices is healthy for an economy, but we want to avoid a return to inflation rates of 10 percent to 15 percent as that could significantly destabilize the economy,” he warned.
Solomon Star, Honiara