Recent shocks and long-term change in the Samoan economy

Policy Research. The strengths exhibited by the Samoan economy during the period of steady growth from 1998 to 2007 have since been tested by con-siderable volatility in economic activity, declining employment, rapidly rising prices, the global financial crisis, and the September 2009 tsunami. The economy has done reasonably well in the face of these challenges with key economic support in the form of aid, remittances and tourism. Questions are raised about the future viability of these forms of support. The economy of Samoa has been subjected to severe shocks since the most recent economic update, in 2007. At the time of that update, Samoa had benefited from a decade of annual growth in real GDP—averaging 3 per cent—accompanied by prudent fiscal and monetary policies. Yet, in a remarkably prescient caveat to this good performance, it was noted that Samoa remains a small, geographically isolated and highly vulnerable island economy. Potential fiscal pressures from natural disasters, an ageing and diabetes-prone population, and possible resource flow constraints from effective graduation out of the least developed country status in 2010, are major medium-term risks facing the Samoan economy (Vaai 2007:1)