Samoa's economy suffers as downturn hits its expat workers

New Zealanders holidaying closer to home in the recession and making the most of cheap airline deals have helped keep Samoa's tourist numbers up, but the global economic downturn is still causing it some woes.

Prime Minister John Key will see the effects for himself when he visits the island today.

Samoa has one of the stronger economies of the South Pacific, but it relies heavily on remittances sent home by Samoans working overseas. Totalling 350.95 million tala ($200 million) last year, they make up a quarter of Samoa's gross domestic product, - and while remittances are holding up, there are concerns about how rising unemployment in the United States, Australia and New Zealand will affect this.

Samoa's second-largest earner, tourism, is also recession sensitive, leaving the economy vulnerable. But it has benefited from New Zealanders (who make up almost half of all visitors to Samoa) and Australians making the most of cheap deals offered in the competition between Air New Zealand and Polynesian Blue.

Samoa - after reforming its public sector and economy in the 1990s - has been dubbed a "model economy" of the Pacific and in December 2007 the United Nations recommended it be designated a developing country in 2010.

But the subsequent economic downturn has led to pleas from Samoa for the UN to revise this.

The effects have started to be felt. Inflation rose sharply to 13.8 per cent by May this year and after the economy grew an average of 3.2 per cent from 2002 to 2007, GDP shrank by 3.4 per cent last year and is forecast to decline by 4.9 per cent this year, largely because of a fall in manufacturing and job losses such as at a Japanese car cable harness factory, which is a major employer.

Employment of Samoans in American Samoa is also fragile. The fish cannery plant COS Samoa Packers is to close in September because of increases in commodity prices.

Aid money makes up 15 per cent of Samoa's GDP - last year New Zealand gave about $15 million in aid, a figure which is expected to increase significantly over the next three years as the Government implements its strategy of economic growth driven by the private sector.

While in Samoa, Mr Key will visit a a rural village to see the changes income from the recognised seasonal employers' scheme has brought about. Samoa is one of the main participants in the scheme - last year Samoans made up 1234 of about 5500 who took part. The scheme provides up to seven months a year of work in the horticulture and viticulture industries in New Zealand.

The New Zealand Government also recently gave up to $1 million towards helping pay children's school fees in Samoa, to help ensure financial pressures did not affect its reasonably high school enrolment rates.

School is compulsory until age 14 and about 95 per cent of children attend, although that number drops to 25 per cent after the age of 14.