Samoa: 2024 Article IV Consultation-Press Release; and Staff Report

2024ARTICLE IV CONSULTATION—PRESS RELEASE;ANDSTAFF REPORT Under Article IV of the IMF’s Articles of Agreement, the IMF holds bilateral discussionswith members, usually every year. In the context of the2024Article IV consultation withSamoa, the following documents have been released and are included in this package: •APress Release •TheStaff Reportprepared by a staff team of the IMF for the Executive Board’sconsideration ona lapse-of-time basis, following discussions that ended onNovember 27,with the officials ofSamoaon economic developments and policies.Based on information available at the time of these discussions, the staff report wascompleted onDecember 16. •AnInformational Annexprepared by the IMFstaff. •ADebt Sustainability Analysisprepared by the staffs of the IMF and the World Bank. The documents listed below have been or will be separately released. Selected Issues TheIMF’s transparency policy allows for the deletion of market-sensitive information andpremature disclosure of the authorities’ policy intentions in published staff reports andother documents. Copies of this report are available to the public from International Monetary Fund•Publication ServicesPO Box 92780•Washington, D.C. 20090Telephone: (202) 623-7430•Fax: (202) 623-7201E-mail:publications@imf.org Web:http://www.imf.org International Monetary FundWashington, D.C. IMF Executive Board Concludes 2024 Article IV Consultationwith Samoa FOR IMMEDIATE RELEASE Washington, DC–January 31, 2025:The Executive Board of the International MonetaryFund (IMF) concluded the Article IV consultation1with Samoa on January 16, 2025 andendorsed the staff appraisal without a meeting on a lapse-of-time basis.2 Samoa’s economic recovery has been remarkable. Following a 15 percent contraction over 3years during the pandemic, GDP growth rebounded to 9.2 percent in FY2023 and acceleratedfurther to 9.4 percent in FY2024, driven by a quick recovery in the tourism sector. Inflation hasdeclined from double digit levels in FY2023 to 2.9 percent year-on-year in October 2024. Thefiscal surplus increased further to 10.1 percent of GDP in FY2024, supported by robust grantflows, buoyant tax revenues, and restrained expenditures, including low capital spending amidcapacity constraints. The current account moved to a surplus in FY2024 which, combined withcontinued strong grant inflows, supported a significant increase in foreign reserves. GDP growth is projected to remain robust at 5.5 percent in FY2025, driven by an anticipatedpickup in public investment and the preparations and hosting of the Commonwealth Heads ofGovernment Meeting (CHOGM). Inflation is expected to rise moderately amid the ongoingeconomic recovery. While the near-term outlook remains favorable, growth is expected to slowto the historical average of around 2 percent in the medium term. Furthermore, risks to theoutlook are skewed to the downside amid heightened global uncertainties and potentialpressures on inflation, including from significant excess liquidity in the banking system. Executive Board Assessment In concluding the 2024 Article IV consultation with Samoa, Executive Directors endorsed thestaff’s appraisal, as follows: Samoa’s near-term economic outlook remains favorable. GDP growth in FY2025 is projectedto remain well above pre-pandemic levels, supported by the preparations and hosting ofCHOGM and the envisaged expansionary fiscal stance. Inflation is expected to risemoderately as the economic recovery continues. GDP growth is expected to convergetowards the historical average of about 2 percent over the medium-term. Risks to the outlookare tilted to the downside, including from a slowdown in key trading partners amid heightenedglobal uncertainty, as well as upside risks to inflation from external and domestic sources. Samoa’s recent policy mix has helped build significant economic buffers but has alsopresented challenges. Large fiscal surpluses have improved debt dynamics, resulting in anupgrade to Samoa’s debt distress rating from high to moderate in the IMF-WB DSA, but lowcapital spending is undermining the economy’s productive capacity. The tight fiscal stance, coupled with high grants and remittance inflows and the exchange rate peg, has resulted inthe emergence of a large current account surplus with the external sector assessed to besubstantially stronger than the level implied by fundamentals and desired policy settings. Theresulting large build up in foreign reserves has also created excess liquidity in the bankingsystem. An expansionary fiscal stance will support the economy, while fiscal reforms can improve theeffectiveness of policy and mitigate risks. The focus in the near term should be overcomingcapacity constraints to execute much needed public investment, including climate-relatedprojects. Maintaining PFM controls over the DDP, including through the election cycle, remains apriority. Improving fiscal data and implementing further PFM reforms can also help