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Asia and Oceania
Samoa |
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Last reviewed: 10 July 2009 |
Country information
Economy
Basic economic facts
GDP per capita: US$2047 (2007)
Annual growth: 0.3% (2008)
Inflation: 11.5% (2008)
Major industries: agriculture, tourism, fishing, manufacturing
Major trading partners: American Samoa, Fiji, Japan, US, New Zealand, Australia
UK Trade & Investment Country Profile: Samoa
Samoa's economy has traditionally been dependent on development assistance, family remittances from overseas, agriculture, and fishing. Official development assistance is equivalent to around 14% of GDP (2007 est), while remittances amount to around 25% of GDP (2006).
A determined programme of economic reforms initiated during the 1990s helped earn Samoa the reputation as the Pacific's model economy and placed the Samoan economy among the fastest growing of the Pacific Islands. Economic growth over the period of 2000-2005 averaged 4%, driven by increased public investment, enhanced tourism earnings, and an increase in agricultural production. Coming off a period of fairly strong expansion in 2007, the economy grew by just 0.3% in 2008. Job cutbacks at Yazaki, which assembles automotive parts for export and is the biggest private-sector employer, contributed to the slowdown. The company reduced its workforce by more than a third in 2008 and cut the working week of the remaining employees. In the 12 months to September 2008, value added in manufacturing contracted by 5.7% and in construction by 7.3%. About 3% of formal jobs were lost in the first 9 months of 2008, many from construction and manufacturing. Inflation accelerated to a peak of 18.7% in November 2008, year on year, driven by rising prices of food and fuel. Food was propelled by the rise in global prices, higher costs of agricultural inputs including fuel, and reduced supplies of some locally grown food. Year-average inflation at 11.5% was more than double the 2007 level. The economy is forecast to contract by about 1.0% in 2009 (ADB, Pacific Economic Outlook 2009).
Only 12% of the total population in Samoa is engaged in formal paid employment. Two thirds of the labour force is absorbed by "subsistence" village agriculture, with the agricultural and fishing industries accounting for around 11% of GDP. Industry accounts for around 25% of GDP, with manufacturing dominated by a Japanese-owned company "Yazaki", which produces automobile electrical systems for an assembly plant in Australia under a concessionary market-access arrangement. Yazaki is the largest single employer in Samoa. The service sector accounts for around 60% of GDP with tourism the largest single activity. Increased arrivals from New Zealand and Australia have contributed to the sector’s 18% annual growth rate in the year ending April 2007.
Samoa's export base is narrow, with its main sources of export income fish (the largest commodity export), garments, beer, coconut oil and cream, noni fruit products, taro, automobile parts and tourism. It is primarily through tourism revenue, remittances and official development assistance that Samoa is able to finance its persistently large trade deficit (43% of GDP in 2007). In his recent budget address, the Finance Minister, Niko Lee Hang, stressed that it is imperative that Samoa apply responsible fiscal and monetary policies in order to arrest the balance of payments decline. Samoa maintains a pegged exchange rate regime, and has a benchmark for international reserves at 4.0 months of import cover.
Over the long term, Samoa's key strengths include a cohesive social structure, a flexible labour market and an improving investment environment. Reinvigoration of the agricultural and manufacturing sectors are a key focus of Samoa's latest Strategy for the Development of Samoa. Samoa's economy remains vulnerable to external shocks, particularly the vagaries of weather. Cyclones in 1990, 1991, and 2004 caused severe economic setbacks.
