At its Meeting on the 10th of August 2023, the Central Bank
Board met to discuss and set an appropriate monetary policy stance for the fiscal year
2023/2024.
In making their decision, the Board considered the strong recovery Samoa is currently
experiencing since it reopened its border back in August 2022. Annual Real GDP growth is
presently around 3.2 percent at end March 2023 and is expected to be around 6.5 percent by
June 2023. The source of this robust recovery comes from strong expansions in sectors such as
Commerce, Business Services, Personal and other services, Accommodations & Restaurants and
Transport services. In addition, visitor earnings, remittances and exports of goods receipts have
increased significantly in FY 2022/2023, adding to the strong economic recovery so far.
Likewise, the country’s gross foreign reserves jumped by 35.1 percent to a record $1,098.3
million or $1.10 billion, equivalent to 11.1 months of import cover at end June 2023, given the
significant inflow of Government grants and budget support from its development partners
during year. On financial conditions, total liquidity of the banking system remains high,
recording its highest level yet of $575.4 million at end June 2023 while interest rates continue
to remain relatively low in FY 2022/2023. However, total lending of both commercial banks and
non-bank financial institutions continue to slow down despite the strong growth in the
economy as financial institutions remain cautious and continue to prioritise consolidation of
existing loans following the COVID-19 lockdowns.
As a result of this fast economic recovery, local demand for goods and services have risen
steadily since the reopening of borders with many local agricultural goods at the produce and
fish market recording large price hikes in the past 7 months. In particular, local price inflation
has risen from 3.9 percent in June 2022 to 9.2 percent in June 2023. While imported price
inflation has also increased from 13.6 percent to 14.5 percent in June 2023, it is currently
slowing down since March 2023. Overall, the headline inflation rate rose from 8.8 percent last
year to 12.0 percent at end June 2023.
On the global front, the world economy is expected to expand by 3.0 percent in 2023, down
from 3.5 percent in 2022 according to the July 2023 World Economic Outlook by the
International Monetary Fund (IMF). Weighing on global economic activities is the subsequent
impact of the increases in central bank policy interest rates over the past year to address the
high inflation rates around the world. The ongoing war in Ukraine, adverse and extreme

weather-related events as well as possible slowing of China’s economic recovery also have
downside risks to the global economy.

Looking ahead to fiscal year 2023/2024, exports of goods like coconut oil, nonu juice and re-
exports are expected to expand further by 3.9 percent, pushing up total export proceeds.

Visitor earnings is also expected to increase by 4.5 percent, although slowing down from the
very strong growth in 2022/2023 while remittances are forecast to decrease by 2.8 percent
after recording increases in the past 7 years in a row. All in all, gross official foreign reserves are
expected to remain robust in 2023/2024, with a projected increase to an equivalent of 11.2
months of imports in view of Government grants and budget support funds outlined in the
Budget FY 2023/2024.
After stronger than expected growth in FY 2022/2023, the Samoan economy (in terms of real
GDP) is naturally expected to slow down to 3.5 percent in 2023/2024 as the pent-up demand
settles down as well as a levelling effect (comparing to very low levels during the pandemic
period) one year removed from the COVID affected GDP numbers. From the FY 2023/24
Government Budget, several Government projects like the Apia Port Project, road widening
project and the preparations for the upcoming Commonwealth Heads of Government Meeting
(CHOGM) in October 2024, will contribute to this positive growth and translate to expansion in
Construction, Transport and Communication services to name a few.
On prices, the headline inflation is expected to ease back to 9.6 percent by end 2023/2024 from
12.0 percent in June 2023 as imported prices are expected to drop further in the last half of
2023 before a small increase in 2024. Most of the main global commodity prices like oil (Brent
crude), agricultural food like grains and meat (chicken and beef) are expected to decline in 2023
and for some, rebound in 2024 but in small increases. On domestic inflation, the current strong
domestic demand conditions create uncertainty on how high and long, the increase in domestic
inflation will last. Latest estimates based on the expected continuation in the influx of overseas
visitors and local producers sticking to high prices, will expect domestic inflation to rise and
peak at 10.4 percent around December 2023 before receding to 9.6 percent by June 2024.
Given the smaller but still positive growth in real GDP expected for FY 2023/2024 and the still
elevated level of headline inflation rate at around 9.6 percent by end June 2024, the CBS Board
approved a monetary policy stance that will gradually remove or withdraw the very loose or
easing monetary conditions that exist in the financial system and the economy. The aim is to
try to absorb some of the very high liquidity from the banking system and at the same time
implement a normalisation of monetary policy that will attempt to reduce domestic demand
pressures and reduce domestic inflation. In view of this, there may be a moderation or gradual
rise in market interest rates in the year ahead. However, the Central Bank will ensure to engage
with the banking sector and will monitor this normalization process, that will also be subject to
the speed of the economic recovery.