Samoa’s pandemic-battered economy is continuing its decline, a new report from the Central Bank of Samoa has found. 

In its “Quarterly Bulletin for March 2021” released last week, the bank found that the overall decline in the nation’s economic output appeared set to continue, despite some optimism about increasing levels of foreign aid. 

The headline figure for the report, which examines the nation’s economy as of the December 2020 quarter, found that the nation’s real (inflation-adjusted) Gross Domestic Product (G.D.P.) had fallen by 9.2 per cent on a yearly basis in December 2020.

The December figure represents an increasing decline in the national economic output. In the year to September, G.D.P. was down by 8 per cent. 

But on a quarterly basis, the bank says that the economy recovered slightly in the December quarter following a year of significant decline; economic output was up by 2.4 per cent on a quarterly basis. 

The slight rebound was led by slight improvements in business services, accommodation, and restaurants, other manufacturing among other sectors of the economy. 

It translated into a quarterly increase in nominal G.D.P. per capita, which rose by 3.4 per cent to $2,535 per Samoan  

But the comparatively modest quarterly rebound comes in the context of a 9.1 per cent fall in G.D.P. per capita in the year to December. 

On a yearly basis, inflation declined into negative territory of 1.6 per cent for the quarter under review; a drop from positive 1 per cent the year prior. 

But the bank noted some macroeconomic upsides, including a rise in Samoa’s currency reserves. 

“Gross official foreign reserves went up by 6.5 percent (or $44.7 million) to $729.6 million during the quarter,” the report said. 

“The country’s foreign reserves level remains high, sufficient to cover 11.5 months of imports of goods.”

But despite structural improvements to the economy businesses continued to suffer from the nation’s overall economic decline, the bank found. 

Export earnings dropped by $6.2 million to $22.6 million on a quarterly basis driven by a fall in re-exports ($5.0 million) and domestically produced exports ($1.2 million). 

COVID-19 restrictions and interruptions to company supply lines and shipments following pandemic-led restrictions were, the bank said, responsible for the decline and a lowering of fish catches. 

Year-on-year total exports were down 30.4 percent (or $9.9 million).

The Government did however record an improvement to its financial position during the quarter under review but mainly as a result of incoming financial assistance from donors, not increased economic activity. 

The Government’s net monetary surplus for the quarter increased by $11.8 million to reach $343.25 million. That growth represents a $94.31 million increase compared to the year prior. 

“This quarterly surplus highlighted the influx of government financial assistance for COVID-19 as well as the usual budget support funds,” the report said. 

“The commercial banks’ average liquidity expanded by $18.61 million (or 6.0 per cent) to $326.71 million against the previous quarter.”

This was underpinned by both average growths of $11.98 million and $6.64 million in commercial banks' holdings of exchange settlement account and vault cash respectively.

On interest rates, the C.B.S. securities overall weighted average yield (or official rate) remained at 0.15 per cent in December 2020, since its last issue in April 2020, but was at 0.17 per cent as at the end of the previous year.

For commercial banks’ interest rates, the weighted average deposit rate fell 11 basis points in the quarter to reach 2.65 per cent over the previous quarter, but was 27 basis points higher than last year's figure.

The weighted average lending rate declined by 16 basis points to 8.50 per cent in December 2020, or 29 basis points lower than the same quarter last year. As a result, the overall weighted average interest rate margin narrowed to 5.85 per cent from 5.90 per cent in the previous quarter, 6.41 per cent in the December 2019 quarter. 

In line with lower costs of borrowing for the quarter; the total commercial banks’ lending to the private sector and public institutions combined increased by $10.52 million (or 0.9 percent) to $1,184.69 million over the previous quarter, or $0.38 million higher over the year. However, due to the adverse impact of the COVID-19 pandemic, the annual average credit growth rate slowed to 3.1 percent at the end of December 2020 from 4.4 percent in the previous quarter.

Gross official foreign reserves went up by 6.5 percent (or $44.7 million) to $729.6 million during the quarter. This was sufficient to cover 11.5 months of imports, up from 10.1 months of import cover in the September 2020 quarter.

The “Balance on Trade in Goods” deficit further increased by 21.1 percent over the previous quarter where import payments rose by 14.7 percent while export receipts fell by 21.4 percent.