In the news: Samoa outpaces comparators but needs to consolidate gains to boost growth prospects

The Web edition of the IMF Survey is updated several times a week, and contains a wealth of articles about topical policy and economic issues in the news. Access the latest IMF research, read interviews, and listen to podcasts given by top IMF economists on important issues in the global economy. www.imf.org/external/pubs/ft/survey/so/home.aspx

Abstract

The Web edition of the IMF Survey is updated several times a week, and contains a wealth of articles about topical policy and economic issues in the news. Access the latest IMF research, read interviews, and listen to podcasts given by top IMF economists on important issues in the global economy. www.imf.org/external/pubs/ft/survey/so/home.aspx

Samoa has become one of the best-managed economies in the Pacific Island region over the past decade, the IMF said in its recent economic review. The economy registered solid growth, low inflation, and improved public finances and international reserve levels, and outperformed comparator countries within and outside the region. Samoa also made progress toward achieving the Millennium Development Goals.

Political stability, close consultation with stakeholders, and extensive efforts to foster a broad consensus for reform have been integral to the country’s success. Nevertheless, economic performance weakened in recent years, the export base continues to be narrow, and the economy remains vulnerable to external shocks. Substantial reforms are needed to consolidate gains and boost Samoa’s long-term growth prospects.

The IMF’s Executive Board commended the authorities for their good macroeconomic management and continued efforts to reform the civil service, liberalize the telecommunications sector, and strengthen banking supervision and its framework for anti-money laundering and combating the financing of terrorism. Also welcomed was the recent pickup in growth and the decline in inflation following a significant increase in 2004 that largely reflected the impact of Cyclone Heta on food prices, and the authorities’ intention to tighten monetary policy in view of the potential balance of payments pressures that could arise from the large budget deficit in 2005/06.

Over the medium term, Samoa’s economic prospects remain favorable, the Board said, if it can sustain macroeconomic stability and facilitate private sector development—notably through deeper reforms of state-owned enterprises and land reform. Fiscal discipline will be essential to further reducing public indebtedness and enhancing Samoa’s flexibility to respond to external shocks. The Board encouraged the authorities to strengthen tax administration and better rationalize and reorient spending toward education, health care, and infrastructure.

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Based on 2005/06 budget.

Data: Samoan authorities and IMF staff estimates.
IMF Survey, Volume 34, Issue 14
Author: International Monetary Fund. External Relations Dept.