IMF Executive Board Concludes 2023 Article IV Consultation with Samoa
IMF News, March 20, 2023
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- Published: March 20, 2023
Economic context and near-term outlook
- Samoa began recovering after a three-year recession driven by the Covid-19 pandemic following the lifting of domestic Covid-19 restrictions in July and the reopening of borders in August.
- Real GDP grew by 4.7 percent y/y in Q3-2022 and is projected to increase by 5.0 percent in FY2023.
- Growth is projected to remain above trend in FY2024 and FY2025 as tourism inflows and the domestic economy normalize.
- Downside risks: uncertainties in the global outlook that could stifle the recovery in tourism and economic activity.
Inflation, external sector, and reserves
- Inflation peaked at over 15 percent y/y in August-September 2022 (driven mainly by a surge in import prices) and fell to 7.5 percent y/y in December 2022 due to lower food and energy prices.
- Inflation is projected to ease further in 2023.
- Reserve coverage was over 8 months of imports in FY2022 and is projected to remain above adequate levels in the medium term, with coverage of about 7 months of imports.
Fiscal position and public finances
- The central government maintained surpluses during the pandemic, supported by buoyant tax revenue (including improvements in tax administration) and grant inflows.
- Under-execution of public investment was a headwind to growth.
- In FY2022 the central government ran a surplus of 5.4 percent of GDP and lowered public debt to 43.7 percent of GDP.
- Executive Directors: support an expansionary fiscal policy focused on growth-enhancing expenditure to support the recovery; encouraged vigilant monitoring of the new District Development Program to ensure high expenditure quality and growth impact.
- Directors noted utility tariff reductions buffered household impacts but encouraged steps to begin restoring tariffs to cost recovery levels.
- Over the medium term, Directors agreed that a revenue-driven fiscal consolidation would contribute to fiscal sustainability and provide space to raise spending on social needs and climate-resilient infrastructure.
- Directors encouraged building on recent efforts to improve revenue administration and policies governing the finances of state-owned enterprises.
Financial sector and macroprudential stance
- Credit growth slowed after accelerating early in the pandemic, with lending to businesses declining and modest growth in household borrowing driven by lending of public financial institutions.
- Private sector leverage: financial system credit to the private sector reached 94.6 percent of GDP.
- Non-performing loans increased but remain within historical averages; high provisioning levels have been maintained and capital ratios remain well above prudential norms.
- Directors encouraged immediate normalization of monetary policy given high levels of private sector credit, inflation, and a tightening domestic labor market; gradual removal of accommodation based on the pace of the recovery was recommended.
- Directors emphasized strengthening the emergency liquidity assistance framework and bank resolution regime; welcomed efforts to reinforce the financial position of the Development Bank of Samoa and to limit risks from public financial institutions while reviewing prudential regulations governing these institutions.
- Directors recommended continued efforts to deepen financial development, assess AML/CFT risks (to mitigate correspondent banking relationship pressures), and implement previous FSAP recommendations.
Structural and social policy recommendations
- Directors supported authorities’ efforts to foster diverse, inclusive growth.
- Encouraged reforms to improve the quality of education and expand access to training programs to enhance human capital and domestic labor opportunities.
- Recommended strengthening the business environment and enhancing climate resilience.
Key statistics and projections (selected figures preserved exactly as presented)
- Real GDP (12-month percent change): 2019/20 -3.1; 2020/21 -7.1; 2021/22 -6.0; 2022/23 5.0; 2023/24 3.6; 2024/25 3.4; 2025/26 3.0; 2026/27 2.6; 2027/28 2.3.
- Nominal GDP (12-month percent change): 2019/20 -2.1; 2020/21 -7.3; 2021/22 0.0; 2022/23 13.4; 2023/24 6.7; 2024/25 7.0; 2025/26 6.1; 2026/27 5.7; 2027/28 5.3.
- Consumer price index (end of period): 2019/20 -3.3; 2020/21 4.1; 2021/22 10.9; 2022/23 5.5; 2023/24 4.5.
- Consumer price index (period average): 2019/20 1.5; 2020/21 -3.0; 2021/22 8.7; 2022/23 10.0; 2023/24 4.0.
- Central Government Finances (in percent of GDP): Revenue and grants: 2019/20 36.0; 2020/21 36.5; 2021/22 38.5; 2022/23 34.6; 2023/24 34.4.
- Of which: Grants: 2019/20 6.8; 2020/21 9.4; 2021/22 5.9; 2022/23 6.0.
- Expenditure (in percent of GDP): 2019/20 30.6; 2020/21 34.7; 2021/22 33.1; 2022/23 36.7; 2023/24 36.8; 2024/25 37.1.
- Of which: Expense (in percent of GDP): 2019/20 27.3; 2020/21 31.3; 2021/22 32.3; 2022/23 33.3; 2023/24 31.1.
- Overall balance (in percent of GDP): 2019/20 5.4; 2020/21 1.7; 2021/22 -2.0; 2022/23 -2.4; 2023/24 -2.5.
- Gross debt outstanding (in percent of GDP): 2019/20 43.3; 2020/21 46.3; 2021/22 43.7; 2022/23 39.3; 2023/24 39.7; 2024/25 40.2; 2025/26 40.8; 2026/27 41.2.
- Broad money (M2) (12-month percent change): 2019/20 -0.9; 2020/21 8.1; 2021/22 2.2; 2022/23 12.0; 2023/24 7.5; 2024/25 6.5.
- Private sector credit, commercial banks (percent of GDP): 2019/20 48.5; 2020/21 53.1; 2021/22 53.2.
- Private sector credit, total financial system (percent of GDP): 2019/20 85.5; 2020/21 92.6; 2021/22 94.6.
- Regulatory capital to risk-weighted assets, ratio: 2019/20 28.7; 2020/21 28.1; 2021/22 28.8.
- Non-performing loans to total gross loans, ratio: 2019/20 2.9; 2020/21 3.7; 2021/22 4.6.
- Current account balance (percent of GDP): 2019/20 -14.6; 2020/21 -11.6; 2021/22 -4.0; 2022/23 -3.8; 2023/24 -3.4; 2024/25 -2.3; 2025/26 -1.2.
- Merchandise exports, f.o.b. (percent of GDP): 2019/20 5.2; 2020/21 3.8; 2021/22 4.7.
- Merchandise imports, f.o.b. (percent of GDP): 2019/20 37.8; 2020/21 41.4; 2021/22 45.3; 2022/23 44.4; 2023/24 42.6; 2024/25 41.8; 2025/26 41.0.
- Services (net) (percent of GDP): 2019/20 13.2; 2020/21 -3.9; 2021/22 -2.9; 2022/23 8.4; 2023/24 8.6; 2024/25 10.4; 2025/26 12.2; 2026/27 13.1; 2027/28 14.1.
- Of which: Tourism receipts (percent of GDP): 2019/20 16.0; 2020/21 10.8; 2021/22 11.5; 2022/23 14.0; 2023/24 16.1; 2024/25 17.0; 2025/26 18.0.
- Income (net) (percent of GDP): 2019/20 -3.5; 2020/21 -1.8; 2021/22 -2.8; 2022/23 -2.7.
- Current transfers (net) (percent of GDP): 2019/20 21.8; 2020/21 24.8; 2021/22 31.8; 2022/23 31.9; 2023/24 29.9; 2024/25 27.4; 2025/26 25.3; 2026/27 24.0.
- Gross official reserves (million U.S. dollars): 2019/20 222.3; 2020/21 288.5; 2021/22 303.2; 2022/23 323.2; 2023/24 320.3; 2024/25 317.8; 2025/26 311.1; 2026/27 315.8; 2027/28 333.6.
- Gross official reserves (in months of next year's imports): 2019/20 6.4; 2020/21 7.9; 2021/22 7.2; 2022/23 7.4; 2023/24 7.1; 2024/25 6.3.
- External debt (in percent of GDP): 2019/20 42.9; 2020/21 46.1; 2021/22 36.4; 2022/23 37.4; 2023/24 38.0; 2024/25 38.6; 2025/26 39.4; 2026/27 40.0.
- Market rate (tala/U.S. dollar, period average): 2019/20 2.70; 2020/21 2.57; 2021/22 2.61.
- Real effective exchange rate (12-month percent change): 2019/20 -4.1; 2020/21 -1.0.
- Memorandum items: Nominal GDP (million tala): 2019/20 2,340; 2020/21 2,169; 2021/22 2,460; 2022/23 2,625; 2023/24 2,810; 2024/25 2,981; 2025/26 3,151; 2026/27 3,318.
- GDP per capita (U.S. dollars): 2019/20 4,372; 2020/21 4,225; 2021/22 4,140; 2022/23 4,437; 2023/24 4,602; 2024/25 4,823; 2025/26 5,050; 2026/27 5,266; 2027/28 5,517.
IMF Press Release No. 23/84, March 20, 2023.
