Home 
Countries and Regions Country Assistance Plans Document
|
Country Assistance Plans - Samoa : I. Country Performance Assessment
A. Economic Performance Assessment1. In 1999, the growth rate of the Samoan economy accelerated to 5.3 percent, from 3.4 percent in 1998. This reflected a 7.3 percent expansion in the tertiary sector, which accounted for 56 percent of gross domestic product (GDP); a 4.4 percent expansion in the secondary sector, which accounted for 23 percent of GDP; and a 2.4 percent expansion in the primary sector, which accounted for 21 percent of GDP. Within these broad sectoral categories, strong growth was recorded in commerce, hotels and restaurants; transportation and ommunication; government; construction; and fisheries. A 9 percent increase in tourist arrivals stimulated the commerce and transport sectors. The growth acceleration was accompanied by a drop in the inflation rate to 0.3 percent, from 2.2 percent in 1998. Declining local food prices more than offset a rise in prices of imports attributable to depreciation of the Tala and higher prices in Samoa's major suppliers. 2. The balance of payments remained in overall surplus of 0.01 million Tala in 1999, with a capital account surplus just exceeding a current account deficit of 58.3 million Tala (8.1 percent of GDP). The latter was more than double the 1998 deficit despite tourism growth and a 14 percent increase in private remittances, and reflected a 22 percent surge in imports driven by the growth in domestic demand and the one-off import of a government vessel. Merchandise export earnings were stagnant in aggregate: although domestic export earnings rose 10 percent, re-export earnings fell from the unusually high level of 1998. Net foreign assets reached 183 million Tala, providing 6.3 months of import cover. Government’s external debt declined to 431.2 million Tala at the end of 1999, or 60 percent of GDP; while debt servicing costs as a percentage of merchandise exports reached 17.9 percent. During 1999, the currency depreciated against the Australian, Fijian, New Zealand and US dollars, the yen, and the Euro. The real effective exchange rate depreciated by 4.7 percent, which was a welcome boost to international competitiveness given the real appreciation of previous years. 3. Government finance statistics show that, for the fourth fiscal year in succession, government ran an overall budget surplus in 1998–1999, equivalent to 0.3 percent of GDP, although it had budgeted for an overall deficit of 1.3 percent of GDP. Revenue was slightly below the original budget estimate because of a shortfall in tax revenue, but the current balance was close to expectations because of below-budget current expenditure. Externally funded development expenditure was also below the budgeted level because of delays in commencement of some projects. As a result of the surplus, government increased its net deposits in the banking system, reinforcing the absence of crowding out pressure on the private sector. In the fiscal year 1999–2000, an overall deficit of 3.1 percent of GDP was budgeted, to be financed by external borrowing. Revenue and current expenditure were projected to rise by 8.2 percent and 6.6 percent, respectively, leaving a current surplus of 3.4 percent of GDP. Budget outturns for the first half of the fiscal year were broadly in line with budget estimates. However, it remained to be seen whether above-budget tax revenue collections would continue to offset a shortfall in non-tax revenue, and whether Government would be able to achieve the targeted improvement in its net credit position with the banking system. The probability of this last achievement was reduced by the delay in disbursement of the $3.5 million second tranche of the Financial Sector Reform Program loan. 4. The broad money supply (M2) increased by 13 percent in 1999, compared with 5 percent in 1998. This expansion was entirely attributable to a rise in net domestic assets, with credit to the private sector growing by 17.6 percent. Credit extended to public institutions increased by 4.2 percent; while Government reduced its net credit position by 5.8 percent, partly to make advance payments on overseas debt in order to avoid possible Year 2000 computer problems. All categories of commercial bank loans to the private sector showed significant growth, including loans to the agriculture, forestry and fisheries sector. This last development demonstrated the impact of financial sector liberalization, which has allowed banks to include a risk premium in lending rates. The weighted average lending rate of commercial banks fell slightly to 12.6 percent in 1999, from 12.8 in 1998, while the weighted average deposit rate remained at 5.1 percent. The interest rate spread thus declined to 7.5 percent in 1999 – and it remained at that level in early 2000 as lending and deposit rates both fell by 0.2 percent. (Appendix 1, page 1). 5. In the context of ongoing stability in the macroeconomic
environment, and continued improvement in the microeconomic policy
environment, an economic growth rate of around 4 percent is expected
in 2000. Allowing for the seasonal downturn in economic activity that
characterizes the first quarter of the year, tourism remained robust
early in the year; and a substantial public investment program will
stimulate the construction sector. Agriculture is likely to continue to
depress the aggregate growth outcome by stagnating or declining for the
fourth year in succession, underlining the importance of its prioritization
in the Statement of Economic Strategy 2000–2001.
|
RSS Feeds
Back
Top of page