s invitation to brief its members in parliament and take questions on the governor ’ s address later this month. the release last week of the governor ’ s address and the annual economic report was a good opportunity to take stock of the economy after a particularly difficult time. as exporters, you will know that global demand for south africa ’ s exports suffered a severe setback in the second half of last year as a result of the turmoil in international financial markets. as a result of the crisis in asia, the share of south african exports destined for asian countries, including japan, declined from more than 21 % of total exports in the third quarter of 1997 to about 15 % in the fourth quarter of last year. african economies were also experiencing hard times, and the contribution of exports to africa fell slightly to below 14 % of total exports over the same period. south african exporters did, to some extent, offset the effects of the recession in these economies by redirecting trade flows to markets less affected by the crisis. exports to the united states, for example, increased by about 30 % in rand terms between 1997 and 1998. but the effects of the global crisis and continued buoyancy in imports were such that the annualised current account deficit swelled to 2. 6 % of gross domestic product in the second half of last year. although the deficit was not large by international standards, it nevertheless raised concerns that the level of spending, especially on public sector capital formation, could not be sustained. last year ’ s tightening in monetary policy, and the improvement in international economic conditions as the turmoil in financial markets subsided, caused a marked recovery in the current account this year. the improvement in the current account reflected a revival in international demand for south african exports and a significant contraction in local demand for imports. export volumes rebounded satisfactorily in the first quarter of this year, but lost some momentum in the second quarter, when the current account slipped into deficit again. it seems that the current account may remain in deficit for the remainder of the year, although exports should still benefit from the lagged effects of the rand ’ s depreciation, the resurgence of foreign demand and an increase in international commodity prices. as the lagged effects of interest rate cuts continue feeding through to economic activity and the recovery gains momentum, the demand for imports can be expected to strengthen. the turnaround in the inventory cycle, which appears to have begun in the second quarter of this year, will heighten local demand

would like to encourage all of us, the private sector, non - government organizations, civil society groups, communities and all solomon islanders to work with our government as they take us forward. i also believe this is an opportune time to rethink and strategize how we could realistically map our future. as we heard earlier, the economic forecast for the next four years is for an average growth of 4. 5 percent. however, there are several issues with what would have been quite a positive outlook. firstly, as i have discussed during previous annual report speeches, this rate of growth is far too slow and will not transform our economy. we have a rapidly growing population that will demand more resources and support. we need to address our high population growth. secondly, the 1 percentage point increase to 4. 5 percent ( from 3. 5 percent over the past five years ) only reflects the major infrastructure projects that will take place in the next few years. once they are completed, growth is expected to return to its normal trend. thirdly, growth has only centred on a few commodities like logs and have been far from inclusive, meaning that people in the rural areas have not benefited from the positive spill overs of development or in pidgin “ mefala rural pipol no lukim nomoa growth ya ”. what should we do? i will share some thoughts on possible policy directions that could and should be undertaken in the next couple of years. ( a ) robust growth to realistically grow the economy without overheating it, we should be growing at an average of 6 % over the medium term. to achieve this, we should address structural issues in the economy, and appropriately invest in the growth areas that we can realistically develop and sustain. now, government has successfully made strides in some structural reform areas over the past couple of years, from the business and regulatory environments to communication and taxes which, are being implemented. nonetheless, more needs to be done. to grow at 6 percent means it will only take us around 12 years to double growth. such a growth also has to be inclusive, cross cutting and achievable. so how do we go about it? ( b ) foundations for an inclusive and broad - based economy to illustrate this point, we could lay the foundations of a broad - based economy by putting more emphasis on agriculture and tourism ( without disregarding the other sectors ). agriculture is an inclusive growth area because most people in our rural