Samoa’s classification downgraded to“lower-middle income” from “upper-middle income” country


The new World Bank country classifications by income level for 2021-2022 see Samoa downgrading its classification to “lower-middle income” from its previous status as an “upper-middle income” country.

The US State department outlines that Samoa is experiencing a deep recession due in large part to the economic effects of the COVID-19 pandemic. 

Samoa is one of the most politically and economically stable democratic island countries in the Pacific, featuring a history of strong sociocultural structures and values. Last year, the Central Bank of Samoa stated that the country’s economy was in full recession as the impact of COVID-19 global pandemic affected all sectors. From a peak in the third quarter of 2019, Samoa’s GDP has contracted by 12 percent in real terms through the end of 2021. 

The recession was caused by declines in tourism, business services, transport, and the communications sector. 

Samoa’s government understands that its economy needs external investment. A World Bank report on the economy of Samoa has been struck by multiple shocks, including natural disasters, the COVID-19 pandemic, and the war in Ukraine was recently released. 

“Governments need to continue supporting the vulnerable and embark on structural reforms to support inclusive economic recovery.” 

The World Bank says the border closure for Samoa resulted in a sharp contraction of tourism and related industries and hindered construction activity. 

“Despite policy support and robust remittances, real GDP contracted by 7.1 per cent. 

“Inflation tanked to a historical low of -3.0 per cent amid the economic slowdown but has been soaring in recent months. Poverty, measured against national standards of living, is likely to have risen from the latest pre-pandemic rate of 22.7 per cent (2018), with urban areas affected more due to the higher concentration of jobs in the services sector. 

“Substantial development partner grants, spending under-execution, and favourable tax revenue outturn, reflecting improved tax compliance helped attain a fiscal surplus of 2.2 per cent of GDP. 

“The current account recorded a substantial deficit (14.3 per cent of GDP) as tourism receipts came to a standstill.” 

Furthermore, Samoa’s economy is projected to contract further by 5 per cent in FY22, driven by the continued border closure and the domestic COVID outbreak in March 2022. 

“Nonetheless, a gradual recovery is projected from FY23 onwards with growth averaging 3.3 per cent in FY23-24.