Samoa needs $500 million stimulus - Economist
Samoa will need to invest in a public stimulus package equivalent to $500 million tala if it plans to keep the economy running through the course of the coronavirus economic downturn, independent analysis has found.
The amount equates to about 20 percent of Samoa's nominal Gross Domestic Product.
ANZ Bank Economic Researcher, Kishti Sen, told the Samoa Observer that while the figure seemed large, an economic rescue package is never going to be able to replace the lost income from tourism and remittances.
"I won’t be perturbed if the debt to G.D.P. [ratio] pushes beyond 50 [per cent]. The objective should be to preserve as much of the economy as you can so when you get to the other side of the pandemic there is an industry ready to provide jobs," he said.
“The best thing for the Government to do is to stabilise the private sector and try and keep the economy operating as best as they can.
"I would suggest some income support for people and businesses who are directly and indirectly impacted by the Covid-19 induced downturn would help. This would stabilise consumer demand and reduce economic hardships."
An earlier Pacific Insight economic impact report prepared for the A.N.Z. bank’s private clients suggested that Samoa was on track to face an 18.7 per cent contraction in the country's nominal Gross Domestic Product (G.D.P.) this year.
The country is forecast to lose a total of 146,900 visitors in this year, the report forecasts.
Meanwhile employment forecasts suggest that Samoa will lose a total of 6,532 jobs in the next year; or a loss of 19 per cent of total jobs.
Earlier this week, the Ministry of Finance Chief Executive Officer, Leasiosiofa'asisina Oscar Malielegaoi said the community-wide scoped stimulus package for Samoa is currently brewing and may be soon finalised.
Leasiosio did not reveal the amount of the rescue package to save jobs and keep businesses afloat for the unprecedented pandemic effects.
"Cheap long-term loans from multilateral development partners would provide a safety valve for debt servicing burden into the future," Mr. Sen said.
The Government's outstanding debts for the December 2019 quarter stood at $1.04 billion, a decrease of some $43 million over the preceding 12 months, as confirmed by an update on Governmental Finances for the 2019-20 Financial Year.
Of the outstanding debt amount (99.0 percent) which is equivalent to $1.03 billion, were external loans to bi-lateral and multilateral partners.
Loans based on bi-lateral agreements at the end of the quarter amounted to $477.9 million. Loans to the People’s Republic of China (P.R.C.) stood at $391.4 million and had decreased by $29.0 million over the previous year.
Due to the large amounts required for stimulus spending, Research Associate at the Lowy Institute in Australia, Alexandre Dayant said the releasing of a stimulus package of this scale raises a sustainability issue.
"Samoa’s debt remains in high-risk of distress according to the IMF, given the country’s high vulnerability to natural disasters. Public debt reached 48 percent of GDP in 2019, below the authorities’ ceiling of 50 percent," said Mr. Dayant.
Despite the flags raised, both experts agree that there are not many alternatives for Pacific Islands countries in general, and Samoa in particular, just need to act quickly and strongly.
"We should also be mindful that while we are in the midst of an economic crisis, everyone’s priority is to overcome the health crisis first and foremost," said Mr. Sen.