Despite growth supported by higher tourism earnings and remittance-related spending, Samoa’s Gross Domestic Product is estimated to have grown in financial year 2015 by slightly less than the earlier forecast.
|Selected economic indicators (%)||2015||2016|
|ADO 2015||Update||ADO 2015||Update|
|Current Account Balance (share of GDP)||-10.9||-6.9||-9.4||-5.4|
Source: ADB estimates.
Visitor arrivals in Samoa were up by 6.1% in financial year (FY) 2015 to April over the same period a year earlier partly because of its hosting of a United Nations conference in September 2014. Remittances increased by 5.6% year on year during the period on higher inflows from Australia and New Zealand, which together account for nearly three-quarters of remittances. However, higher remittances were offset by declines in agricultural production and nonfood manufacturing.
Following 2 consecutive years of deflation in Samoa, consumer prices rose in FY2015, but by less than forecast in Asian Development Outlook (ADO) 2015, because of higher costs for health care, restaurant food, clothing, and footwear.
Higher capital outflows have drained foreign reserves such that, at the end of March 2015, gross foreign reserves covered only 4.1 months of merchandise imports, down from 5.3 months a year earlier.
Growth in Samoa is expected to moderate in FY2016 slightly more than earlier forecast in light of the recent weakness in agriculture and nonfood manufacturing. Government spending is also likely to be lower, by about 2%, following a decline of more than 20% in external grant inflows. However, strong inflows from remittances and tourism are seen to continue, augmented by receipts from the Commonwealth Youth Games.
The ADO 2015 projection for inflation in FY2016 still stands. The current account deficit for FY2015, however, is now estimated to be lower than forecast in ADO 2015 because of low food and fuel import costs. Following the FY2015 current account outcome, and anticipating higher net income transfers, the forecast for FY2016 is revised down as well.
Excerpted from the Asian Development Outlook 2015 Update.