The Asian Development Bank was forecasting a growth rate on 2 and a half percent for 2013.
But the ADB's Pacific Department principal economist, Emma Veve, says that estimate was made before Cyclone Evan hit Samoa.
Presenter: Bruce Hill
Speaker: The Asian Development Bank's Pacific Department principal economist, Emma Veve.
VEVE: Our writing on the prospects for 2013 obviously was done before the cyclone hit Samoa. And that will have some implications for growth next year. We were looking at about two-and-a-half per cent growth in 2013, and obviously with the investment that will be required to rebuild what's been destroyed and damaged in Samoa, that will actually create some growth. We'll also expect to see a continued rise in remittances as the overseas Samoans step in to help out their friends and family. So while there'll be some losses in terms of lower agricultural production, maybe a short term impact on tourism, overall it will probably be balanced out by some of the extra expenditures that are applied to recover. So we're looking for probably still around two-and-a-half per cent growth in 2013.
HILL: You mentioned remittances, which is a significant part of the Samoan economy. Now I know that Samoans are very generous and dig deep and give to their relatives and people back home during emergencies, but New Zealand and Australia are not necessarily massive engines of growth, they've been impacted by the GFC the same as anyone else. So are remittances in the long run going to have a few pressures on them, might people want to spend their money at home rather than send all their money back to Samoa?
VEVE: Yeah well there certainly is always that risk that the remittances will drop off and we saw them drop off during the global economic crisis. But in the case of Samoa they've really come back strongly during 2012, and we expect that to continue in 2013. Whether remittances can be relied upon long term is certainly a question, so it's ensuring that the money that is sent back to Samoa is used in a productive manner that creates opportunities for growth within the Samoan economy itself.
HILL: What about tourism, how strongly is tourism growing and how big a proportion of the economy is that?
VEVE: Well tourism is a relatively small proportion of the economy, but it has been growing strongly. Over 2012 there was good growth in tourism, and we expect that to continue on with solid growth year on year in, in tourism in Samoa. They've been putting a reasonable amount of money into advertising, which usually sees tourism pick up fairly quickly. Once the initial sort of first couple of months post the cyclone are passed, usually on past experiences there's not a lot of long term impact on tourism from that.
HILL: What about the trade balance? This is what Samoa can export overseas, it can make some money selling stuff overseas, but balanced against what it has to pay for to import, and that's kind of out of balance isn't it, like most island countries?
VEVE: Yeah absolutely, I mean all island countries tend to import a lot more than they manage to export. The Samoan economy for the size it is, is actually reasonably well diversified. They've got some manufacturing, they export food and beverage products, they did have significant automotive exports, so those have dropped off in recent times. But there's a good base there for them to continue to drive their export, but they really will be in a situation of always having to import more than they export within the foreseeable future. That means that they do become very reliant on other sources of income from overseas, like tourism, like remittances, to help balance out the situation.
HILL: Now I know that the Samoan government is nothing like the American government, it doesn't have a16-trillion dollar debt or anything like that, but it does have a debt doesn't it? Is it reasonable for Samoa's size, or do you think that they should try and get their debt down?
VEVE: The government has been working to get its debt down in recent times, and recognises that's an issue it needs to work on. The debt has been taken on largely for productive investments that will help to generate growth within the economy, but of course these take time to actually impact on the growth of the economy. In the meantime the government has been working to reduce its budget deficit year on year, and has a good solid plan going forward to reduce that deficit, so its reliance on debt to balance its budget will be reduced. And they're also looking to rely more on sources of grant financing, so that's not debt financing, for their capital investments they're looking at.