RBF now ex­pects bet­ter 2.4% growth this year

Fiji Sun - - Sunbiz - RACHNA LAL

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.

Ex­ter­nal sec­tor

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.”

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