On May 7, 2018, the Executive Board of the International Monetary Fund (IMF) concluded the 2018 Article IV consultation1 with Samoa.
Samoa’s economy has shown resilience and continues to perform well. Growth remained robust at 2.5 percent in 2016/17, driven by commerce, services and agriculture. Inflation picked up to 1.3 percent in 2016/17, compared to close to zero in the previous year, but remains well below the authorities’ target of 3 percent. The current account deficit narrowed to 2.3 percent, driven by temporary factors. The Samoan Tala appreciated against the U.S. dollar during 2016/17, although there was little change in the nominal and real effective exchange rates. Financial soundness indicators highlight that commercial banks are well capitalized and that earnings, profitability, and liquidity indicators are within historical norms.
Growth is projected to moderate to 1.8 percent in 2017/18, due to the negative impact of the closure of the Yazaki manufacturing plant in August 2017 and normalizing of fishing exports after two exceptionally good years, only partially offset by the impact of higher public infrastructure spending and Samoa’s hosting of regional meetings. Growth is expected to rebound in 2018/19, as two new businesses scale up operations at the old Yazaki plant and several infrastructure projects are completed. In 2019/20, growth is projected to accelerate to 5 percent, driven by tourism related sectors as Samoa hosts the Pacific Games in July 2019, before settling at just above 2 percent in the medium term. Inflation is expected to continue to pick up to about 3 percent in the medium term. The current account deficit is expected to widen to just above 4 percent of GDP in the next few years, driven by a rebound in imports to support investment for the Pacific Games and other infrastructure projects.
Under Article IV of the IMF’s Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country’s economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board.
At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country’s authorities. An explanation of any qualifiers used in summings up can be found here: http://www.imf.org/external/np/sec/misc/qualifiers.htm.