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

Author(s):
International Monetary Fund. External Relations Dept.
Published Date:
August 2005
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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.

2004/052005/06
Samoa2001/022002/032003/04Projections
(12-month percent change)
Real GDP4.41.83.53.03.0
Change in CPI (end period)9.81.617.2-2.92.0
(percent of GDP)
Central government budget,
overall balance-2.1-0.6-0.9-0.9-4.01
(months of next year’s total imports)
Official reserves4.23.43.63.94.0

Based on 2005/06 budget.

Data: Samoan authorities and IMF staff estimates.

Based on 2005/06 budget.

Data: Samoan authorities and IMF staff estimates.

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