Economy's downturn to continue: Central Bank
While the nation laments the global pandemic’s effect on the economy, the Central Bank of Samoa [C.B.S.] has warned that the worst is yet to come.
The full effect of the external pressures on the Samoan economy will likely only befall Samoa's future, the C.B.S. has predicted in a new report.
Titled “Update of the Samoan economy in the first eleven months of FY 2019/20 to May 2020” the release from the nation’s central bank paints a pessimistic picture, in the short-term at least.
The Government’s net financial position in May 2020 recorded a “huge” surplus of $67.14 million over the same month last year, the report said.
While visitors declined and total visitor earnings declined by almost 24 per cent to $375.26 million, private remittances increased by 3 per cent to $511.74 million in the eleven months to May 2020 compared to the same time last year.
In the first eleven months of the Financial Year 2019-2020, total export earnings increased by 0.1 per cent to $117.17 million compared to the same period last year.
Domestically produced exports, by contrast, declined by 0.8 per cent.
The balance of payments is in surplus by $99.6 million at May 2020 over the same period last year due mostly to Government inflows of external funds for budget support and COVID-19 relief.
The current level of official cash reserves was sufficient to cover nearly eight months of imports according to the C.B.S. report, which was significantly higher than the nearly six months recorded in May of 2019.
The world economy’s downward slope due to the COVID-19 pandemic continues to worsen and is expected to be severely hit, much worse than the 2008 Global Financial Crisis, or the 1987 stock market crash.
According to the International Monetary Fund’s [I.M.F.] June 2020 World Economic Outlook, the global economy is now projected to fall deeper into a recession, contracting sharply by -4.9 per cent in 2020, a steep fall from the estimated growth of 2.9 per cent in 2019.
Samoa’s main trading partners – the United States, Australia and New Zealand – have taken major hits from the pandemic’s worsening effects. Samoa is next in line , the C.B.S. report found.
The U.S. released its second Gross Domestic Product (G.D.P) estimates for the first quarter of 2020 points projecting a 5 per cent contraction, higher than the -4.8 percent initially expected. The new figures end that country’s longest period of economic expansion, possibly since the great recession of the early 20th Century.
Australia’s economy continues to decline after being hit with bushfires, drought and now COVID-19, shrinking by 0.3 per cent in the March 2020 quarter from growth of 0.5 per cent growth in the previous quarter.
New Zealand’s real (unadjusted for inflation) G.D.P. shrank 1.6 per cent in the March 2020 quarter; the largest decline in 29 years.
“With the weak outlook on our main trading partners’ economies, the external pressures on the Samoan economy will likely be felt in its full effects in the first half of [Financial Year] 2020-21,” the Central Bank’s report reads.
“These outlooks [globally and domestically] are highly uncertain and will depend on the magnitude and speed in which COVID-19 containment measures and international travel restrictions may be lifted across most countries.”
Samoa’s latest G.D.P. growth rate released for the March 2020 quarter stood at 0.7 per cent - a major decline from a 2.3 per cent increase from the December 2019 quarter.
The slow-down in quarterly growths is due to the adverse impacts of the measles outbreak in November-December 2019 followed by the sudden introduction of the COVID-19 outbreak.
In hopes to ease the effect of the decline on the local economy, the C.B.S. recommends that Ministries continue implementing budget expenditure programmes on time.
The Central Bank also recommends public sector employees and members of the public who can afford to share what they have by spending generously to stimulate the economy.