2022 Index of Economic Freedom

Solomon Islands

OVERALL SCORE56.5
WORLD RANK110
Rule of Law

Property Rights50.6

Judicial Effectiveness59.5

Government Integrity42.3

Government Size

Tax Burden70.5

Government Spending60.1

Fiscal Health98.0

Regulatory Efficiency

Business Freedom44.4

Labor Freedom60.2

Monetary Freedom79.0

Open Markets

Trade Freedom68.6

Investment Freedom15.0

Financial Freedom30.0

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Quick Facts
  • Population:
    • 0.7 million
  • GDP (PPP):
    • $1.6 billion
    • -4.3% growth
    • 2.4% 5-year compound annual growth
    • $2,455 per capita
  • Unemployment:
    • 0.8%
  • Inflation (CPI):
    • 3.4%
  • FDI Inflow:
    • $9.0 million

The Solomon Islands’ economic freedom score is 56.5, making its economy the 110th freest in the 2022 Index. The Solomon Islands is ranked 22nd among 39 countries in the Asia–Pacific region, and its overall score is below the regional and world averages.

Over the past five years, the economy of the Solomon Islands registered slow growth from 2017 to 2019 before contracting in 2020 and recovering in 2021. Economic freedom has fluctuated over that period, but always at a fairly low level. With increases in scores for rule of law outpacing a drop in its business freedom score, the Solomon Islands has recorded a 1.5-point overall gain in economic freedom since 2017 and remains in the “Mostly Unfree” category. International donor assistance contributes to the country’s strong fiscal health, but scores for investment freedom and financial freedom are among the world’s lowest.

IMPACT OF COVID-19: As of December 1, 2021, the Solomon Islands government’s response to the pandemic ranked 160th among the countries included in this Index in terms of its stringency. The economy contracted by 4.3 percent in 2020.

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Background

The scene of some of World War II’s bitterest fighting, the South Pacific archipelago of the Solomon Islands gained independence from the United Kingdom in 1976 and became a parliamentary democracy. In 2003, after years of ongoing and economically destructive ethnic violence in the islands, an Australian-led multinational force disarmed ethnic militias, restored law and order, and rebuilt government institutions. Manasseh Sogavare was reelected prime minister in 2019, having served previously as prime minister from 2014 to 2017. Although the islands are rich in timber and such undeveloped mineral resources as lead, zinc, nickel, and gold, much of the population continues to work in subsistence farming, fishing, and artisanal forestry. The Solomon Islands remains one of Asia’s poorest nations.

Rule of Law

Property Rights 50.6 Create a Graph using this measurement

Judicial Effectiveness 59.5 Create a Graph using this measurement

Government Integrity 42.3 Create a Graph using this measurement

Property rights are uncertain. Conflicts over land tenure have been a major source of civil unrest. The judiciary is independent, but a lack of resources makes the conduct of timely trials difficult and leads to weak enforcement of contracts and a large case backlog. Residents of rural areas have limited access to the formal justice system. Corruption is a serious problem in the judicial, mining, and fishing sectors.

Government Size

The top individual income tax rate is 40 percent, and the top corporate tax rate is 30 percent. Other taxes include property and sales taxes. The overall tax burden equals 21.2 percent of total domestic income. Government spending has amounted to 36.5 percent of total output (GDP) over the past three years, and budget deficits have averaged 1.0 percent of GDP. Public debt is equivalent to 13.9 percent of GDP.

Regulatory Efficiency

An arbitrary and somewhat flexible business regulatory environment contributes to business uncertainty. Most Solomon Islanders depend on agriculture, fishing, and forestry for part or all of their livelihoods, and the formal labor market is not well developed. According to the World Bank, subsidies and other transfers consumed 5.1 percent of the government’s budget in 2020.

Open Markets

The Solomon Islands has six preferential trade agreements in force. The trade-weighted average tariff rate is 8.2 percent. Economic dynamism and development remain stifled by serious deficiencies in the trade and investment regime. Private-sector development is also undercut by the state’s outsized role in the economy. The financial sector is underdeveloped, and limited access to credit constrains entrepreneurial development.

Country's Score Over Time

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Regional Ranking

RANK COUNTRY OVERALL CHANGE
1Singapore84.4-5.3
2New Zealand80.6-3.3
3Taiwan80.11.5
4Australia77.7-4.7
5South Korea74.60.6
6Japan69.9-4.2
7Samoa68.36.4
8Malaysia68.1-6.3
9Brunei Darussalam64.8-1.8
10Indonesia64.4-2.5
11Kazakhstan64.4-6.7
12Mongolia63.91.5
13Thailand63.2-6.5
14Vanuatu62.92.4
15Philippines61.1-3.0
16Micronesia6110.6
17Tonga60.83.3
18Vietnam60.6-1.1
19Bhutan59.31.0
20Kiribati59.214.8
21Cambodia57.1-0.2
22Solomon Islands56.50.0
23Fiji56.4-5.8
24Kyrgyz Republic55.8-7.9
25Uzbekistan55.7-2.6
26Papua New Guinea54.6-4.3
27India53.9-2.6
28Sri Lanka53.3-2.4
29Bangladesh52.7-3.8
30Tajikistan49.7-5.5
31Nepal49.7-1.0
32Burma49.6-5.6
33Laos49.2-4.7
34Pakistan48.8-2.9
35China48-10.4
36Maldives47.3-7.9
37Timor-Leste46.31.6
38Turkmenistan46.2-1.2
39North Korea3-2.2
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