ADB highlights need to maintain stimulus and support for Samoa's tourism-dependent economy

The economic recovery from the COVID-19 pandemic in tourism-dependent, Polynesian countries will be slow, with continued support needed to allow the private sector to drive future economic growth, says a new Asian Development Bank report.(A

The Asian Development Outlook (ADO) 2021, ADB’s flagship annual economic analysis, projects the economies of the Cook Islands, Samoa, and Tonga will continue to decline in 2021 with economic contraction and fiscal deficits deepening.

The report predicts the resumption of international travel will see gross domestic product (GDP) growth return to positive in each country in 2022, but their economies will still be smaller than before the outbreak of the pandemic.

“The tourism-dependent economies of the Cook Islands, Niue, Samoa, and Tonga have been hit hard by COVID-19,” said Public Management Economist and ADO report author James Webb of ADB’s Pacific Subregional Office in Fiji.

“While lives have been saved, livelihoods have been lost. To preserve future jobs and maximize the eventual economic recovery, it is imperative that spending sustains the private sector to survive and compete.”

The ADB report describes the profound effect COVID-19 has had on private businesses in Polynesia. Income from tourism—which in 2019 accounted for 61% of GDP in the Cook Islands, 23% in Samoa, and 10% in Tonga—has fallen to zero so far in 2021. While the direct and indirect impact of this cannot yet be fully assessed, the report says it will continue to worsen until travel resumes.

In Samoa, GDP contracted 3.2% in 2020, with the onset of COVID-19 coming after a measles outbreak in late-2019. While visitor arrivals fell 30.2% and commerce and manufacturing declined, remittances grew by 4.9%.

The ADO says Samoa’s economy will contract a further 9.2% in 2021 before recovering to 3.1% growth in 2022. Despite increased grants from development partners, including $22.9 million from ADB, a fiscal deficit equal to 3.1% of GDP is projected for 2021, when government stimulus spending will equal 4.2% of GDP.

ADB has been supporting Samoa since 1966 and has committed $190.9 million in loans, $204.4 million in grants, and $33 million in technical assistance. Cumulative loan and grant disbursements to Samoa amount to $258.1 million.



Photo file RNZ Pacific  Caption: Apia