RBF now expects better 2.4% growth this year
Our domestic growth forecast has once again been revised – this time with the expectation of 2.4 per cent growth. This is as opposed to the earlier revised figure announced in March of 2.2 per cent.
The growth figures is still much lower than the forecast a year earlier of 3.5 per cent and has been attributed to the devastation caused by the Tropical Cyclone Winston in February and the floods in April. The Chairman of the Macroeconomic Committee and the Governor of the Reserve Bank of Fiji, Barry Whiteside, said the natural disasters have caused big damage. The damage, he said, has been to infrastructure, loss of output especially in the agriculture sector and reduced production time of businesses.
“Consequently, the agriculture (including cane and non-cane crops), electricity, manufacturing, forestry & logging and the water & sewerage sectors are expected to be a drag to overall growth,” he said. The revised growth for this year also takes into account an expected pickup in construction activity led by post-cyclone reconstruction and rehabilitation work.
In addition, an uptick in wholesale & retail activity is also envisaged as households replenish domestic items and increase purchases of reconstruction materials.
This is facilitated by the assistance provided through the Fiji National Provident Fund (FNPF), Social Welfare benefits and the Hope for Homes initiatives following Cyclone Winston and the floods. Mr Whiteside said strong tourism demand, growing inward remittances and improved investor confidence should provide added impetus to growth despite the weak global demand and declining terms of trade. than the 3.1 per cent earlier anticipated. Growth next year is forecast to be broad based “The major contributors will be manufacturing; transport & storage; financial & insurance activities; wholesale & retail trade and the construction sectors,” he said. In 2018, the economy is expected to grow further by 3.2 per cent.
Meanwhile, the trade deficit is forecast to widen this year due mainly to higher imports especially of machinery & transport, food and manufactured goods. This is while exports are anticipated to fall (especially agro-based) from the effects of TC Winston.
The decline in exports (excluding aircraft) by 1.4 per cent largely reflects lower re-exports, sugar, molasses and fruits & vegetables. At the same time, imports are projected to grow by 8.5 per cent mainly reflecting the higher demand for reconstruction of housing and infrastructural amenities and as well as to meet domestic food shortages following TC Winston. Nevertheless, Mr Whiteside said the current account deficit is projected to narrow to 1.2 per cent of GDP in 2016 supported by the higher inflows from services, remittances and foreign aid. “Despite an uptick in April inflation (3.8%), prices are expected to normalise towards the 2 per cent forecast for the end of the year,” he said. “Foreign reserves were around $2,015 million as at May 24, equivalent to around 5.7 months of retained imports of goods and non-factor services and are expected to remain stable during the year.”