With the strict COVID restrictions implemented around the world during 2020, global shipping and trade fell significantly.
This led to acute supply shortage problems around the world, which began to see global commodity prices increase starting from January 2021 right up to now.
This has gradually seeped through to Samoa’s inflation rate through its imported (prices) inflation. Russia’s invasion of Ukraine in early 2022 further drove up imported prices like fuel and gas, which pushed up global inflation further.
In effect, prices such as imported food, construction materials, household items and fuel have risen steadily in 2021 and 2022, culminating in Samoa’s headline inflation rate at 11.3 per cent at end of October 2022, substantially well above its medium-term target of 3.0 per cent.
In the external sector, the closure of Samoa’s international borders starting from March 2020 resulted in a complete loss of visitor earnings (falling from over SAT$500 million tala to zero for at least two years) as well as loss of employment opportunities for many working in the tourism industry.
However, this huge drop in tourism earnings was outweighed by the pickup in remittances from our families (diaspora) residing aboard (mainly in New Zealand, Australia and the US) as well as a pickup in seasonal workers’ income due to more opportunities offered by New Zealand and Australia.
In addition, Samoa received large inflows of aid grant funds for its COVID-19 Response and general budget support funds from its usual development partners like the World Bank and the Asian Development Bank (ADB) and its bilateral partners of Australia, New Zealand, People’s Republic of China and Japan.
These financial assistances helped protect Samoa from the pandemic as well as coping with the negative impact of isolation during these unprecedented times.
These resulted in an improvement in the country’s official foreign reserves during the pandemic, rising from SAT$490.7 million at the end of FY2018/2019 (pre-COVID) to a total level of SAT$732.7 million in FY2020/2021 (or equivalent to 10.7 months of imports) and SAT$812.7 million in FY2021/2022 (10.9 months of imports).
Similarly, the domestic financial system was relatively resilient and sound despite the negative impact of the COVID pandemic on employment and production.
The commercial banks were in good shape despite the immediate shutdown of the tourism industry (who were clients of the banks).
The commercial banks’ remained well capitalised while the non-performing loans were low and the provisioning by banks was more than adequate.
The commercial banks also were able to offer COVID relief assistance to their various clients during the pandemic.