Cushioning the impact of the coronavirus
These are tough times for Samoa’s private sector, with the country coming out of a deadly measles epidemic over a month ago, only to face more periods of uncertainty brought on by the global spread of the new coronavirus (COVID-19).
Fear triggered by the rapid spread of the virus’ infection rate globally has jolted markets around the world with shares dropping in recent days, including the markets in the Pacific’s largest economies Australia and New Zealand.
Overnight Wednesday the World Health Organisation (WHO) announced that after careful assessment and due to the rapid spread and severity of COVID-19, it has concluded that it is a global pandemic.
The Samoa Government has left no stone unturned in its bid to keep the virus at bay through the imposition of restrictions on countries with confirmed cases; the screening of all incoming passengers; and a reduction in the number of commercial flights into Samoa.
Located over 2,800 km from New Zealand and close to 4,000 km from Australia, it would be easy for us to brush off concerns about the impact of the virus on our lives, knowing how far we are from the Pacific’s two largest economies who so far have reported the largest number of confirmed COVID-19 cases.
However, it would be wrong to take a business-as-usual approach to this looming global health crisis, and assume we will escape its impact.
We are already seeing its effect on travel with thousands of Samoans affected. Local businesses are also beginning to feel the pinch of the virus’ impact on Chinese exports with importers looking around for alternative suppliers.
Prior to the onset of COVID-19, tourism operators were already counting their losses from the measles epidemic, which claimed over 80 lives. The Samoa Tourism Authority (STA) in January calculated losses by the sector to be an estimated $10 million tala.
Last December Dr Robert Kirkby, a macroeconomist at the Victoria University in Wellington, projected the halving of growth in Samoa’s gross domestic product (GDP) due to a measles-triggered drop in tourism numbers.
These projections of Samoa’s vulnerable tourism sector are likely to drop further with the world travel industry taking a hit from the virus.
Governments around the world have swung into action, announcing various measures, in a bid to cushion the impact of the global pandemic on their economies.
The measures include stimulus packages targeting severely hampered industries such as the tourism and hospitality as well as transport sectors, to ensure their economies did not slid into recession as global economic growth slows down.
With officials at the Samoa Government currently in discussions on the final makeup of the 2020-2021 Budget, it would make sense for a stimulus package to be formulated as part of the next budget, to assist Samoa’s private sector.
The objective of the stimulus package would be to support companies that play a critical role in our national economy, boost employment and increase spending locally.
The measures could include the cutting of bank interest rates to make it more attractive for entrepreneurs to borrow to lead to the circulation of more cash within the economy. This would trigger the weakening of our exchange rate, which would benefit our exports.
An increase in exports can translate to more revenue coming into our economy, which can lead to more spending to give the economy a much needed boost.
For the tourism sector, local hoteliers with debts owed to the banks could have their grace periods for loan repayment extended, and a visa-free policy introduced for tourists from Samoa’s largest visitor markets Australia and New Zealand.
Nonetheless there should be various options available – in terms of having a stimulus package that can protect and reinvigorate local businesses as well as boost the economy – for the Government and ultimately Parliament’s consideration.
We say this being cognisant of the number of ordinary Samoans who work in the private sector, whose wages families depend on for their daily survival.
A worse case scenario of the Government failing to consider a stimulus package, could see local companies laying off hundreds of employees. Ultimately the goal of a stimulus package is to protect jobs and make sure businesses continue to operate.
And while the virus is a health crisis, it would help a great deal if officials start to treat it as a financial crisis, knowing the implications of a number of restrictions being put in place.
In these uncertain times, our officials in Government should think outside the box, and look at all possible options to ensure the virus’ impact is minimal and not disruptive to the lives of the people.
Have a lovely Friday Samoa and God bless.