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Apia, Samoa – July 5, 2024 – At the meeting on the 28thof In June 2024, the Board of Directors of the Central Bank of Samoa (CBS) approved the continuation of the Central Bank’s monetary policy for the 2024/2025 financial year in order to reduce the level of excess liquidity in the financial system.
In addition, CBS will also continue its efforts to normalize or increase its official interest rate.
The monetary policy stance will support real economic growth forecast of 6.7% by June 2025, while real economic growth is expected to reach 10.6% in June 2024.
This economic outlook reflects the positive impact of hosting the Commonwealth Heads of Government Meeting (CHOGM), the implementation of various new and ongoing government projects, and further positive business activity related to high tourism, remittances and export earnings.
On the other hand, elevated downside risks, such as ongoing international geopolitical tensions, slower growth among major trading partners and our vulnerability to adverse weather conditions, could weigh on this outlook.
The downward trend in headline inflation so far is expected to continue to 3.6% by June 2024 and to around 3.8% by June 2025. This is because market researchers predict small increases in international oil and meat prices and domestic spending is expected to be strong.
“However, our vulnerability to natural disasters and any adverse and unexpected global developments in international commodity markets continue to pose risks to our inflation forecasts,” the central bank statement said.
The country’s external sector will continue to be strong in fiscal year 2024/2025, with official foreign exchange reserves expected to exceed $1.4 billion (equivalent to just 13.5 months of merchandise imports). This is more than enough to meet the country’s international commitments.
Increased tourism and private remittance inflows, coupled with further inflows of capital aid funds, will drive this strong position in the coming year.
The financial system continues to be sound and stable, with ample liquidity in the banking system, currently as high as US$717.1 million. The average bank loan interest rate is low and will remain below 9.0% in the short term.
From this perspective, continued engagement and discussion with the financial sector is crucial to the central bank’s efforts to support economic growth and maintain low inflation rates.
The Bank will continue to monitor and review its monetary policy decisions if economic and financial conditions change over the next twelve months.
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