(press release) – At its Meeting on the 7^th of September 2012, the Central Bank Board approved the continuation of its accommodative monetary policy stance in the financial year 2012/13.

In making its decision, the Board took into account the fragile state of the world economy since the outbreak of the global financial crisis four years ago, as well as the current slowdown in the Samoan economy.

The July 2012 World Economic Outlook published by the International Monetary Fund pointed to a 3.5 percent growth in the world economy, revised down from earlier estimates due to the escalating debt and political crisis in Greece and Spain. As a result, growth estimates for both advanced and emerging economies are expected to come down in 2012. Closer to home, the macro-economic conditions in Australia and New Zealand, two of Samoa’s main trading partners, are also expected to be lower than initially thought.

For Samoa, the latest National Accounts figures showed that the economy grew 1.2 percent in the twelve months to end March 2012 down from 2.0 percent in the same period to end June 2011. And, for the financial year ending June 2012, we are estimating the economy to have grown by 1.3 percent.

Parliament approved another expansionary fiscal policy for 2012/13, with an overall Government Budget deficit of around 6.1 percent of GDP, providing some stimulus in the face of the both sluggish global recovery as well as weak domestic economic conditions.

Despite inflation currently at 6.2 percent at end June 2012, it is expected to drop to 0.9 percent in 2012/13 due to subdued external demand as well as expected improvement in domestic supply. Real GDP is expected to grow by 1.5 percent in 2012/13 with expected improvements in exports, remittances, tourism earnings and government loan disbursements propping up international reserves at a comfortable level of around 6.0 months of imports in 2012/13.

With eased inflationary pressures and the expected comfortable level of our international reserves in 2012/13, the Board felt that monetary policy should remain loosened to support the economic recovery.

Credit growth has been slow, so monetary policy in 2012/13 will therefore aim at either holding market interest rates at their current low levels or reduced further in order to stimulate private sector demand and investment. The aim is to continue to provide an enabling environment for the private sector, to allow it to capitalize on the positive spillover effects of Government’s capital investment in infrastructure and construction.

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