Economic Analysis - 2016 Growth Outperformance Not Replicable - FEB 2018

BMI View: We have revised Samoa's real GDP growth forecast down to 2.0% in 2018 as the closure of the Yazaki Samoa manufacturing plant appears to have been a bigger drag on the economy than previously expected. That said, we expect government initiatives to develop the renewable energy sector and to build up the tourism industry to provide some support.

The Samoan economy shrank by 0.5% y-o-y in real terms in Q217, down from a growth rate of 1.5% y-o-y in Q117, and marking its first quarterly economic contraction since June 2014. This brings the cumulative real GDP growth rate in H117 to 1.0% y-o-y, which was in line with our expectations that the high growth rate of 5.8% registered in 2016 would taper off in 2017 due to a decline in the manufacturing sector ( see ' Growth To Slow But Tourism Development To Provide Support ' , April 27 2017). Although ongoing government initiatives to develop the tourism sector and improve power infrastructure are likely to provide some support, this is unlikely to offset the shuttering of the large Yazaki Samoa automotive component manufacturing plant in August 2017 as much as we had previously expected. Accordingly, we now forecast Samoa's real GDP growth to come in at 1.0% in 2017, down from 2.8% previously, before recovering to 2.0% in 2018 and 2.5% in 2019.

Manufacturing To Act As A Drag On Overall Growth

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