Washington, DC – January 31, 2025 – Samoa’s economy has made a remarkable recovery following the COVID-19 pandemic, according to the International Monetary Fund (IMF). The IMF’s 2024 Article IV consultation with Samoa highlighted strong GDP growth, declining inflation, and improved fiscal health, but also warned of future challenges.
Tourism Fuels Recovery
After a 15% contraction over three pandemic years, Samoa’s GDP rebounded to 9.2% in FY2023 and accelerated to 9.4% in FY2024, driven by a resurgence in tourism. Inflation, which had hit double digits in FY2023, eased to 2.9% by October 2024. The fiscal surplus rose to 10.1% of GDP in FY2024, supported by strong grants, tax revenues, and controlled spending. The current account also shifted to a surplus, boosting foreign reserves.
Financial sector risks have declined relative to the pandemic but require continued monitoring. Priorities for the banking system include operationalizing the emergency liquidity assistance framework and enhancing prudential standards. Upgrading governance and prudential regulations for PFIs is also needed to contain potential risks. Establishing an online credit registry will help advance financial inclusion.
Positive Outlook with Risks
The IMF projects GDP growth of 5.5% in FY2025, fueled by public investment and preparations for hosting the Commonwealth Heads of Government Meeting (CHOGM). However, inflation is expected to rise moderately, and medium-term growth is likely to slow to around 2%, with risks from global uncertainties and potential inflationary pressures.
IMF Recommendations
The IMF praised Samoa’s fiscal discipline, which improved debt dynamics, but noted that low capital spending has limited economic capacity. It recommended an expansionary fiscal stance to support growth, particularly through public investment in climate-related projects. Monetary policy should aim to reduce excess liquidity and guide interest rates higher to curb inflation risks, while maintaining the exchange rate peg.
Structural reforms are crucial for long-term growth, including improving fiscal data, reversing pandemic-era utility tariff cuts, and strengthening financial supervision. The IMF also emphasized the need to enhance anti-money laundering measures and streamline regulations for remittances.
Conclusion
Samoa’s recovery is impressive, but challenges remain. The IMF urged continued policy adjustments and reforms to sustain growth and build resilience against future shocks.
Source: IMF Article IV Consultation with Samoa, January 2025
