On May 8, 2019, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation1 with Samoa.
Samoa’s economy faces several challenges but continues to show resilience. Growth reached a five-year low at 0.9 percent in 2017/18, due to the Yazaki manufacturing plant closure in August 2017 and the impact of cyclone Gita in February 2018. Inflation picked up to 3.7 percent in 2017/18, compared to 1.3 percent in the previous year, driven by the impact of Gita on local food prices, a one-time increase in education fees, and higher price of imported fuel. The current account recorded a surplus of 2.3 percent of GDP in 2017/18, compared to a deficit of 1.8 percent of GDP in the previous year, largely due to a temporary increase in transfers in the wake of Gita. The Samoan Tala depreciated against the U.S. dollar and in nominal effective terms but appreciated in real effective terms due to Samoa’s relatively high inflation. Financial soundness indicators highlight that commercial banks’ capital adequacy and liquidity indicators are trending upwards. Banks’ profitability and earnings are subdued amidst a lending slowdown.
Growth is projected to rebound to 3.4 percent in 2018/19, driven by commerce, infrastructure spending, and development of the transport and communication sector. Growth is expected to peak at 4.4 percent in 2019/20, with an uptick in 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 be back below the central bank target of 3 percent in 2018/19 as temporary inflationary pressures recede. The current account is projected to revert to a deficit of 0.5 percent of GDP in 2018/19 as transfers normalize.
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.