Economic Analysis - Growth To Slow But Tourism Development To Provide Support - JUNE 2017

BMI View: The Samoan economy grew by an impressive 5.8% in 2016, but we forecast growth to slow over the coming quarters amid a decline of the manufacturing sector. That said, we believe that strong government initiatives to develop the tourism sector will likely provide some sup port for the economy, which we now for ecast to expand by 2.5% in 2017 .

The South Pacific Samoan economy posted a real GDP growth of 2.8% y-o-y in Q416, marking a slight moderation from the growth rate of 3.3% y-o-y recorded in Q316 and a sharp deceleration from the 7.1% expansion registered in Q216. Buoyed by the H116 economic outperformance, however, the Samoan economy grew by an impressive clip of 5.8% in real terms in full-year 2016, its fastest growth pace since 2008. This was driven mainly by strong expansion in the fishing and tourism-related services sectors. Although we expect the high growth rate to level off over the coming quarters partly due to a decline of the manufacturing sector, we hold a broadly positive view on the outlook of the tourism industry due to strong government initiatives to promote the sector and efforts to upgrade existing infrastructure related to tourism. This will likely be supportive of economic growth over the coming quarters. Accordingly, we now forecast Samoa's real GDP growth to come in at 2.5% in 2017, up from 1.9% previously.

Looking at GDP by production, the strong headline growth in full-year 2016 was driven by a 14.4% jump in fisheries, 8.7% expansion in commerce, 9.9% increase in hotels and restaurants, and a strong growth rate of 10.1% in the finance and business services sectors. High growth in the relatively small fishery sector (which accounts for just 4.0% of GDP) was the result of a new fishing operation that saw a fleet of 22 fishing vessels relocating to Samoa and having their catch processed in the capital, Apia, for export. Meanwhile, both the commerce, as well as the accommodation and restaurant sectors experienced robust growth on the back of the success of the tourism industry. This was in line with our expectations that the tourism and related sectors will continue to benefit from the collaboration with global brands and the country's function as a transshipment point in the Pacific ( see ' Growth To Moderate Despite Fishing And Tourism Boom ' , August 24 2016). Overall, the number of tourists that visited Samoa increased by 4.6% y-o-y between January to November 2016 to 126,008, while visitor spending rose by 7.6% y-o-y in the same period.

High Growth Unlikely To Be Sustained
Samoa - Real GDP Growth, % chg y-o-y
BMI/Samoa Bureau of Statistics

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