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By Fili Sagapolutele

PAGO PAGO, American Samoa (Samoa News, April 3) - Tourism and remittances, bolstered by improved fish exports and construction, account for Samoa's almost 2 percent increase in real Gross Domestic Product (GDP) in 2005 says a United Nations Economic and Social Commission for Asia and the Pacific (ESCAP) report.

The same report says Samoa's inflation for 2005, at about 7.8 percent, was lower than in 2004 when Heta damaged crops, which led to higher prices for local produce and import costs rose because of increased fuel costs.

"The continuing high fuel costs, the public service salary and wage increases and construction expenditures for the South Pacific Games present a severe challenge to the Central Bank [of Samoa] in managing inflation and protecting foreign exchange reserves," the commission reports.

Indeed, the Central Bank recently announced it will be tightening monetary policy to protect foreign exchange reserves and as a result interest rates will rise, credit will be restricted and demand will be compressed.

"The economy of Samoa was supported strongly again in 2005 by remittances and tourism, the two largest contributors to national income and the balance of payments," the UN report says.

Remittances account for up to 20 percent of GDP, while tourism receipts account for about 15 percent. Efforts are being made to increase tourism earnings, through resort hotel constructions, the ESCAP report noted.

The report also credits Samoa's "improved performance... in the construction sector in preparations for the 2007 South Pacific Games and a turnaround in agriculture and fishing."

It notes Samoa's construction industry grew by 29 percent by the end of June 2005 and they expect a further increase of 3 percent in 2006 after the construction for the Games is completed and the further improvements are made in the agriculture and fishing sectors.

The "fishing industry recovered some-what in 2005 following the poor tuna catches since mid-2002" with fish at the top of export earnings for the quarter ending June 2005, accounting for 39 percent of Samoa's exports. The report did not specify fish exports to American Samoa for the canneries.

The report found Samoa's agriculture "has been performing poorly since damage was caused by Cyclone Heta in January 2004 and "subsequently by drought" while a recent agreement between Samoa and New Zealand should enhance the access of Samoa produce to Kiwi markets, hiking export earnings.

Some budget relief is also hoped for after the joint venture between government owned Polynesian Airlines and Australia's Virgin Blue, "which means government will no longer have to cover airline losses," the report says.

The report's overview of all Pacific Island economies, finds countries in the region "face many daunting problems" and these include the physical disadvantages of remoteness, smallness and dispersion, significantly raising transport and other development costs and high fuel prices.

It also observes that while the bulk of Pacific island populations "is doing poorly and a larger portion is slipping into poverty," their economies "hide the fact that a small proportion of these people earned high incomes."

Individuals who earn high incomes "are mainly those benefiting from privileged monopoly positions, which were created largely by governments." the United Nations Economic and Social Commission for Asia and the Pacific reports.

April 4, 2006

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