No vaccine, no spending: Finance chief
As long as there is no coronavirus vaccine available, Samoa's Government will be keeping a tight control on public finances, the Treasury Secretary has said.
That philosophy is reflected in the recently tabled 2020-2021 Financial Year budget, Leasiosiofa'asisina Oscar Malielegaoi, said.
What many had expected to be the country’s first to ever exceed $1 billion amounted to only $965 million in spending.
Following complaints from opposition and experts saying the budget may not be enough to sustain the economy, the Ministry of Finance Chief Executive Officer, Leasiosio, admitted the budget was crafted conservatively.
This is largely due to the imminent threat of the coronavirus pandemic that still lingers across the global economy, he said.
It seems ambitious funding allocation bids made by Ministries underwent a thorough review by the Treasury.
"The Government wants to proceed with caution because we do not know how long [this will last]," he said.
"In case we put all our eggs in one basket now and this pandemic takes all of this and the next year, borders will only open once we get a vaccine [for COVID-19].
"Right now, looking overseas, we only see those who say, [a vaccine] may only be obtained at the end of the year, while the WHO say their perspective is that it may take longer."
Leasiosio noted that the world may never be normal again until a vaccine is discovered.
He said while other countries are giving it a one-go-one-all approach to boost their economy, Samoa is taking it bit-by-bit to ensure the economy does not fall deeper into debt.
"If by 12 months there is still a lockdown and economic activities are still disrupted, then we would have to loan more," he said.
"We are doing it accordingly, which is why it [the deficit] is only 2.3 per cent. Our deficit under our fiscal strategy is 2 per cent. We have gone past 2 [per cent] target and into 2.3 [per cent],” he said,
And while fiscal expansion is good to stimulate the economy, the key principle of Government at the moment is caution Leasiosio stressed,
The 2020-21 financial year Main Estimates project the country to record an overall fiscal deficit of approximately $116.2million tala.
When recalculated under a new method which discounts any Government spending that may generate assets for future use, the Government Finance Statistics, the deficit drops to $82.4million tala or 2.3 per cent of economic output.
On the other hand, Samoa's Gross Domestic Product for the current fiscal year is expected to contract by 3.3 per cent.
Samoa's economy, according to Leasiosio, has reached $2.34 billion in size.
"And a 3.3 per cent contraction means it has cheapened the value of the Government's developments they have done over the years by 3.3 per cent," he said.
"That contraction in a way is a recession.
“[But] the world's economy on average is expected to contract by 5.5 per cent. Numbers change because all are projections, just like our budget."
According to Leasiosio, a 3.3 per cent contraction to Samoa's economy is "very high", the highest in the last five years.
"The highest the economy contracted was about 2 per cent and that was in 2016, it was when the global economy was also undergoing some struggles with our fishing industry market going down," he said.
This comes after a macroeconomist at the Victoria University in Wellington, Robert Kirkby said the accuracy of the Government’s forecast of the Samoan economy going into recession will be determined by the rate at which tourism and remittances rebound.
"How accurate and reasonable this [forecast fall] is will depend heavily on when tourism can resume and what happens to remittances. Remittances are mostly from Australia and New Zealand and since both of these countries appear to be emerging okay from their lockdowns, it seems reasonable that remittances will resume,” Dr. Kirkby told the Samoa Observer in an interview.
“But this will partly depend on travel and the ability of Samoans to visit on working visas. The predicted size of [Samoa’s] recession appears to assume that travel resumes, at least to Australia and New Zealand, in the near future.”
Samoa remains to be one of the few handful of countries who still have not reported a single case of coronavirus along with 10 other neighbouring countries, Kiribati, Marshall Islands, Micronesia, Nauru, North Korea, Palau, Solomon Islands, Tonga, Turkmenistan, Tuvalu, Vanuatu and Tokelau.