IMF Executive Board Concludes 2024 Article IV Consultation with Samoa
IMF News, January 31, 2025
Source details
- Canonical URL
- IMF Executive Board Concludes 2024 Article IV Consultation with Samoa
Other formats
Bibliographic details
- Published: January 31, 2025
Economic performance and recent developments
- GDP contracted 15 percent over 3 years during the pandemic, then rebounded to 9.2 percent in FY2023 and accelerated to 9.4 percent in FY2024, driven by a quick recovery in the tourism sector.
- Inflation declined from double digit levels in FY2023 to 2.9 percent year-on-year in October 2024.
- Fiscal surplus increased to 10.1 percent of GDP in FY2024, supported by robust grant flows, buoyant tax revenues, and restrained expenditures, including low capital spending amid capacity constraints.
- The current account moved to a surplus in FY2024 and, combined with continued strong grant inflows, supported a significant increase in foreign reserves.
- Executive Board endorsed the staff appraisal on January 16, 2025 and endorsed the staff appraisal without a meeting on a lapse-of-time basis.
Projections and outlook
- GDP growth is projected at 5.5 percent in FY2025, driven by an anticipated pickup in public investment and the preparations and hosting of the Commonwealth Heads of Government Meeting (CHOGM).
- Growth is expected to slow to the historical average of around 2 percent in the medium term.
- Inflation is expected to rise moderately amid the ongoing economic recovery.
- Risks to the outlook are skewed to the downside amid heightened global uncertainties and include upside risks to inflation from external and domestic sources and potential pressures from significant excess liquidity in the banking system.
Executive Board assessment — key messages
- Near-term outlook: GDP growth in FY2025 projected to remain well above pre-pandemic levels; inflation expected to rise moderately; medium-term convergence toward about 2 percent.
- Policy mix: Large fiscal surpluses improved debt dynamics and contributed to an upgrade in Samoa’s debt distress rating from high to moderate in the IMF-WB DSA, but low capital spending is undermining productive capacity.
- External sector: Tight fiscal stance, high grants and remittances, and the exchange rate peg have produced a large current account surplus; external sector assessed to be substantially stronger than implied by fundamentals and desired policy settings.
- Monetary conditions: Large build up in foreign reserves has created excess liquidity in the banking system.
Policy recommendations (near-term and structural)
- Fiscal policy
- Adopt an expansionary fiscal stance to support the economy, while addressing capacity constraints to execute much needed public investment, including climate-related projects.
- Maintain Public Financial Management (PFM) controls over the Development Delivery Program (DDP), including through the election cycle.
- Improve fiscal data and implement further PFM reforms to enhance policy formulation, implementation, and credibility.
- Fully reverse the pandemic-era utility tariff cuts, while implementing any support for low-income households transparently through the budget, to address SOE weaknesses and protect the vulnerable.
- Monetary and exchange rate policy
- Continue monetary policy normalization with an aim to guide interest rates higher.
- Retain the exchange rate peg as the appropriate nominal anchor.
- Reduce excess liquidity to reasonable levels and push real short-term rates to positive territory to guard against domestic inflation risks.
- Financial sector and supervision
- Further strengthen financial supervision and regulation, including for PFIs.
- Operationalize the emergency liquidity assistance framework and enhance prudential standards for banks.
- Upgrade governance and prudential regulations for PFIs to contain potential risks.
- Establish an online credit registry to advance financial inclusion.
- AML/CFT and correspondent banking relationships (CBR)
- Strengthen the AML/CFT legal framework and implement effective risk-based supervision to prepare for the APG mutual evaluation in 2027.
- Ensure timely rollout of the e-KYC facility and the National Digital ID to improve customer due diligence.
- Streamline regulatory and supervisory requirements across main remittance corridors, given low ML/TF risks from remittance payments.
- Structural reforms
- Attract foreign investment, reduce trade facilitation costs, mitigate impacts of the pickup in the seasonal workers program, enhance human capital, and raise labor force participation rates to overcome medium-term growth impediments.
Financial, external, and fiscal indicators (selected figures from Table 1)
- Output and inflation (12-month percent change)
- Real GDP: -7.0 (2020/21); -5.4 (2021/22); 9.2 (2022/23); 9.4 (2023/24); 5.5 (2024/25); 2.8 (2025/26); 2.1 (2026/27); 2.0 (2027/28)
- Nominal GDP: -7.5 (2020/21); 0.0 (2021/22); 18.0 (2022/23); 14.9 (2023/24); 8.7 (2024/25); 6.0 (2025/26); 5.2 (2026/27); 5.0 (2027/28); 5.1 (2028/29)
- Consumer price index (end of period): 4.1 (2020/21); 10.8 (2021/22); 10.7 (2022/23); 0.8 (2023/24); 3.5 (2024/25); 2.6 (2025/26); 3.0 (2026/27)
- Consumer price index (period average): -3.0 (2020/21); 12.0 (2021/22); 3.6 (2022/23); 3.1 (2023/24)
- Central Government Finances (In percent of GDP)
- Revenue and grants: 36.5 (2020/21); 38.5 (2021/22); 34.1 (2022/23); 36.0 (2023/24); 33.0 (2024/25); 32.0 (2025/26); 31.5 (2026/27); 31.4 (2027/28)
- Of which: Grants: 6.8 (2020/21); 4.5 (2021/22); 6.2 (2022/23); 4.2 (2023/24); 4.0 (2024/25)
- Expenditure: 34.7 (2020/21); 33.1 (2021/22); 31.0 (2022/23); 25.9 (2023/24); 33.5 (2024/25); 33.4 (2025/26); 33.6 (2026/27)
- Of which: Expense: 31.3 (2020/21); 32.2 (2021/22); 27.5 (2022/23); 25.7 (2023/24); 27.9 (2024/25); 28.3 (2025/26); 28.2 (2026/27)
- Of which: Net acquisition of non-financial assets: 3.4 (2020/21); 0.9 (2021/22); 0.3 (2022/23); 5.4 (2023/24)
- Overall balance: 1.7 (2020/21); 10.1 (2021/22); -0.1 (2022/23); -1.5 (2023/24); -1.9 (2024/25); -2.0 (2025/26); -2.2 (2026/27)
- Gross debt outstanding: 46.3 (2020/21); 43.7 (2021/22); 33.3 (2022/23); 27.7 (2023/24); 22.5 (2024/25); 19.3 (2025/26); 20.4 (2026/27); 21.5 (2027/28); 22.6 (2028/29)
- Money and credit aggregates
- Broad money (M2): 8.1 (2020/21); 2.2 (2021/22); 16.3 (2022/23); 7.7 (2023/24); 7.5 (2024/25)
- Private sector credit, commercial banks: 1.5 (2020/21); 0.2 (2021/22); -2.6 (2022/23)
- Credit, other financial corporations: -0.9 (2020/21); 4.9 (2021/22); 2.9 (2022/23); 8.2 (2023/24)
- Private sector credit (percent of GDP)
- Commercial banks: 53.1 (2020/21); 53.2 (2021/22); 43.9 (2022/23); 39.5 (2023/24)
- Total financial system: 94.0 (2020/21); 94.6 (2021/22); 80.1 (2022/23); 72.3 (2023/24)
- Bank financial soundness
- Regulatory capital to risk-weighted assets, ratio: 28.1 (2020/21); 28.8 (2021/22); 33.2 (2022/23); 29.0 (2023/24)
- Non-performing loans to total gross loans, ratio: 4.6 (2020/21); 4.7 (2021/22)
- Balance of payments
- Current account balance: -14.5 (2020/21); -11.3 (2021/22); -3.3 (2022/23); -0.5 (2023/24); -1.2 (2024/25); -1.3 (2025/26); -1.6 (2026/27)
- Merchandise exports, f.o.b.: 3.8
- Merchandise imports, f.o.b.: 37.8 (2020/21); 41.4 (2021/22); 47.1 (2022/23); 41.3 (2023/24); 43.0 (2024/25); 42.9 (2025/26); 42.7 (2026/27); 42.5 (2027/28)
- Services (net): -3.9 (2020/21); -2.9 (2021/22); 17.6 (2022/23); 16.4 (2023/24); 16.0 (2024/25)
- Of which: Tourism receipts: 21.0 (2022/23); 21.9 (2023/24)
- Income: -1.7 (2020/21); -2.3 (2021/22); -2.7 (2022/23); -2.8 (2023/24)
- Current transfers: 24.8 (2020/21); 31.7 (2021/22); 29.6 (2022/23); 26.4 (2023/24); 25.4 (2024/25); 25.1 (2025/26); 24.6 (2026/27); 24.1 (2027/28); 23.7 (2028/29)
- External reserves and debt
- Gross official reserves (million U.S. dollars) 2/: 288.5 (2020/21); 303.2 (2021/22); 401.7 (2022/23); 494.3 (2023/24); 503.8 (2024/25); 506.2 (2025/26); 523.9 (2026/27); 542.9 (2027/28); 557.5 (2028/29)
- Reserves (in months of next year's imports): 7.9 (2020/21); 6.4 (2021/22); 8.3 (2022/23); 9.0 (2023/24); 8.8 (2024/25); 8.5 (2025/26)
- External debt (in percent of GDP): 46.1 (2020/21); 43.6 (2021/22); 20.9 (2022/23); 17.8 (2023/24); 19.0 (2024/25); 20.3 (2025/26)
- Exchange rates
- Market rate (tala/U.S. dollar, period average): 2.57 (2020/21); 2.61 (2021/22); 2.73 (2022/23); 2.76 (2023/24)
- Real effective exchange rate (12-month percent change): -0.6 (increase signifies appreciation)
- Memorandum items
- GDP (million tala): 2,169 (2020/21); 2,170 (2021/22); 2,562 (2022/23); 2,943 (2023/24); 3,200 (2024/25); 3,391 (2025/26); 3,568 (2026/27); 3,748 (2027/28); 3,938 (2028/29)
- GDP per capita (U.S. dollars): 4,136 (2020/21); 4,032 (2021/22); 4,498 (2022/23); 5,070 (2023/24); 5,474 (2024/25); 5,728 (2025/26); 5,945 (2026/27); 6,160 (2027/28); 6,440 (2028/29)
IMF Executive Board press release, January 31, 2025.