IMF Executive Board Completes the 2021 Article IV Consultation with Samoa
IMF News, March 19, 2021
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- Published: March 19, 2021
Overview
- The Executive Board of the International Monetary Fund concluded the Article IV consultation with Samoa and considered and endorsed the staff appraisal without a meeting on a lapse-of-time basis.
- Samoa secured its border early to protect citizens from COVID-19 and responded quickly to the 2019 measles outbreak and the global pandemic.
- IMF support included a disbursement under the Rapid Credit Facility in April 2020, which helped unlock record budget support grants by the Asian Development Bank and the World Bank.
- The pandemic and preceding measles outbreak pushed the 2020 September quarter real GDP to its 2014 level and produced scarring effects on sustainable development goals and wellbeing.
- Resilient remittances and the government’s commitment to maintaining expansionary fiscal policies in the near term are expected to support a gradual recovery starting in FY2022.
Executive Board assessment — outlook and risks
- The Samoan economy is projected to bottom in FY2021, with an economic recovery to follow.
- Growth projection: FY2021 contraction of 7.8 percent; recovery to 1.7 percent in FY2022.
- Recovery risks are tilted to the downside and include:
- Under-execution and premature withdrawal of economic stimulus.
- Pace of vaccination and resumption of private sector activities.
- High vulnerability to natural disasters.
- AML/CFT concerns that could adversely impact correspondent banking relationships and remittances.
- Continued international capacity building and strong policy implementation are needed to turn adversity into opportunity.
Fiscal policy and debt sustainability
- Fiscal stance:
- Near term: fiscal policy needs to remain sufficiently accommodative; authorities should maintain stimulus until sustained recovery.
- Medium term: a strong commitment to consolidation is required, through gradual withdrawal of stimulus, revenue mobilization, strengthening PFM, and sound governance.
- Debt assessment:
- Samoa’s debt is sustainable but at high risk of distress when considering vulnerability to natural disasters.
- Authorities should secure adequate financing early to stimulate the economy and ensure debt sustainability.
- The annual Unforeseen budget (reserve fund) provides some self-insurance for natural disaster losses.
- Allocating adequate budget to forge climate resilience can provide long-term benefits.
Monetary policy and financial sector
- Monetary policy is appropriately accommodative; efforts must continue to improve monetary transmission.
- A deposit rate cap recently implemented by commercial banks should be time-bound and complemented by SOE/PFI reforms.
- CBS, banks, and stakeholders need to address bottlenecks to credit intermediation, including implementing financial inclusion and PFI reforms.
- Financial stability remains overall sound, but pandemic effects vary across institutions.
- Policy priorities:
- Monitor financial institutions and ensure compliance with prudential regulations.
- Sequence reforms to bring non-bank financial institutions under CBS oversight without overstretching supervisory capacity.
- Improve the balance sheet of the Development Bank of Samoa (DBS).
- Implement the National Financial Inclusion Strategy to reduce inequality.
- Continue implementation of the 2015 FSAP recommendations.
External position and reserves
- Samoa’s external position is assessed to be moderately stronger than fundamentals and desirable policy settings, reflecting import compression, resilient remittances, and sizeable foreign grants.
- The CBS accumulated adequate foreign exchange reserves during the period, according to the ARA metric for credit‑constrained economies.
- Projected recovery will stimulate import demand, deteriorate the current account balance, and lower reserves over the medium term.
- Authorities need to build reserve buffers to at least 5 months of prospective imports when considering disaster vulnerability.
- Samoa’s pegged exchange rate system provides a nominal anchor given weak monetary policy transmission.
AML/CFT and governance
- Strengthening the effectiveness of the AML/CFT framework is needed to safeguard remittances and financial stability.
- Recommended actions:
- Strengthen risk-based AML/CFT supervision.
- Enhance compliance with customer due diligence and suspicious transaction reporting by banks and MTOs.
- Implement a national digital identity to facilitate customer identification and address money laundering and corruption risks.
- Mitigate risks from TCSP’s reliance on third party intermediaries for customer due diligence.
- Secure resources for effective operation of the FIU.
- Continue international engagement to address AML/CFT shortcomings and concerns raised by the EU on Samoa as a non-cooperative tax jurisdiction.
Structural reforms and capacity building
- Structural reform priorities to limit scarring and support SDGs:
- Promote agriculture, fishery, and MSMEs for economic diversification and job creation.
- Upskill and reskill the labor force to reduce skill mismatch and increase female and youth labor force participation.
- Realize potential benefits of PACER-Plus to support recovery.
- Enhance climate resilience by upgrading physical infrastructure and mainstreaming climate resilience into sector plans.
- Strengthening capacity to facilitate evidence-based policymaking:
- Prioritize reforms to improve tax administration and PFM systems.
- Strengthen banking sector supervision and mitigate CBR pressures.
- Enhance statistical capacity.
- IMF stands ready to support through capacity development.
Key statistics and projections (selected exact figures)
- Real GDP growth (12-month percent change):
- 2016/17: 1.0
- 2017/18: -2.1
- 2018/19: 3.6
- 2019/20: -3.2
- 2020/21: -7.8
- 2021/22: 1.7
- 2022/23: 3.0
- 2023/24: 3.5
- 2024/25: 2.5
- 2025/26: 2.1
- Consumer price index (period average):
- 2016/17: 1.3
- 2017/18: 3.7
- 2018/19: 2.2
- 2019/20: 1.5
- 2020/21: -2.5
- 2021/22: 2.7
- Central government budget (in percent of GDP):
- Revenue and grants: 2016/17: 30.7; 2017/18: 32.1; 2018/19: 35.7; 2019/20: 38.5; 2020/21: 37.0; 2021/22: 32.3; 2022/23: 33.9; 2023/24: 35.5; 2024/25: 35.9; 2025/26: 36.0
- Of which: grants: 2019/20: 3.4; 2017/18: 6.0; 2018/19: 9.4; 2019/20: 11.2; 2020/21: 5.5; 2021/22: 5.6
- Expenditure: 2016/17: 32.8; 2017/18: 32.9; 2018/19: 40.4; 2019/20: 39.0; 2020/21: 39.1; 2021/22: 38.2; 2022/23: 38.1; 2023/24: 38.0
- Of which: Expense: 2016/17: 23.2; 2017/18: 24.5; 2018/19: 25.8; 2019/20: 28.8; 2020/21: 36.4; 2021/22: 32.7; 2022/23: 31.7; 2023/24: 30.5; 2024/25: 30.0; 2025/26: 29.7
- Of which: Net acquisition of non-financial assets: 2016/17: 9.7; 2017/18: 7.6; 2018/19: 7.1; 2019/20: 4.0; 2020/21: 6.3; 2021/22: 7.4; 2022/23: 7.7; 2023/24: 8.1; 2024/25: 8.3
- Gross operating balance: 2016/17: 7.5; 2017/18: 9.8; 2018/19: 0.6; 2019/20: -0.4; 2020/21: 5.0
- Overall fiscal balance: 2016/17: 0.1; 2017/18: 6.2; 2018/19: -3.4; 2019/20: -6.7; 2020/21: -5.2; 2021/22: -2.7; 2022/23: -2.2; 2023/24: -2.0
- Overall fiscal balance excl. grants: 2016/17: -5.5; 2017/18: -4.3; 2018/19: -14.6; 2019/20: -12.2; 2020/21: -10.8; 2021/22: -8.3; 2022/23: -7.9; 2023/24: -7.6
- Broad money (M2): 2016/17: 7.8; 2017/18: 16.5; 2018/19: 9.9; 2019/20: -0.9; 2020/21: 1.8; 2021/22: 6.7; 2022/23: 4.9
- Private sector credit, Commercial banks: 2016/17: 6.9; 2017/18: 1.6; 2018/19: 6.1; 2019/20: 5.4; 2020/21: 5.3
- Total loan growth, Commercial banks: 6.6; 3.9
- Total loan growth, Public financial institutions: 12.8; 17.2; 9.0
- Private credit to GDP, Commercial banks: 48.2; 47.9; 48.1; 52.4
- Private credit to GDP, Public financial institutions: 27.6; 29.3; 32.5
- Total capital to risk-weighted exposures: 25.1; 27.3; 27.5
- Non-performing loans: 4.1; 4.3
- Balance of payments — current account balance (in millions of U.S. dollars):
- 2016/17: -15.9
- 2017/18: 7.2
- 2018/19: 25.9
- 2019/20: 9.3
- 2020/21: -49.0
- 2021/22: -84.6
- 2022/23: -44.7
- 2023/24: -25.2
- 2024/25: -17.9
- 2025/26: -19.1
- Services (net): 140.6; 158.4; 179.8; 113.9; -26.4; 18.2; 62.0; 107.1; 137.7; 168.3
- Current transfers (net): 140.0; 171.1; 181.3; 188.9; 244.0; 176.5; 186.3; 188.7; 208.3; 216.0
- Gross official reserves (in millions of U.S. dollars): 115.0; 155.6; 185.3; 222.3; 214.7; 168.7; 164.9; 179.4; 190.1; 184.4
- Gross official reserves (in months of next year's imports of GNFS): 3.3; 4.2; 7.0; 6.5
- Public debt (in millions of tala): 1,047.4; 1,113.8; 1,058.6; 1,012.3; 956.1; 1,102.5; 1,215.7; 1,278.9; 1,335.3; 1,389.8
- Public debt (in percent of GDP): 49.6; 52.8; 47.4; 46.7; 49.0; 54.1; 56.8; 56.4; 56.0; 55.6
- External debt (in percent of GDP): 51.9; 46.8; 48.7; 53.9; 56.6; 56.3; 55.9
- Market rate (tala/U.S. dollar, period average): 2.54; 2.52; 2.62; 2.67
- Market rate (tala/U.S. dollar, end period): 2.51; 2.60; 2.63; 2.70
- Nominal effective exchange rate (2010 = 100): 110.1; 106.3; 109.1; 109.3
- Real effective exchange rate (2010 = 100): 104.3; 102.4; 105.2
- Nominal GDP (in millions of tala): 2,110; 2,108; 2,231; 2,168; 1,952; 2,038; 2,142; 2,268; 2,386; 2,499
- GDP per capita (U.S. dollars): 4,212; 4,198; 4,238; 3,961; 3,672; 3,764; 3,913; 4,099; 4,261; 4,407
Source: IMF Executive Board press release — IMF Executive Board Completes the 2021 Article IV Consultation with Samoa (March 19, 2021).
