Growth Predicted

Reserve Bank says Economy up by 1.7 per cent in 2020 Tourism remains positive as visitor arrivals rose by 3.5 per cent cumulative to November Tourism earnings grew 2019 crushing season, both cane and sugar production increased

The Reserve Bank of Fiji (RBF) has projected the economy to grow by 1.7 per cent in 2020, from a 1.0 per cent anticipated growth in 2019. The modest growth estimated for 2019 reflects subdued aggregate demand, mixed sectoral performances, weak business confidence and reduced fiscal stimulus.

Tourism

Tourism remains positive as visitor arrivals rose by 3.5 per cent cumulative to November, due to higher arrivals from the US, New Zealand, Japan, Pacific Island Countries and Australia. In addition, tourism earnings grew by 3.7 per cent to total $1,543.0 million up to the third quarter of the year.

Crushing season

In the 2019 crushing season, both cane (6.5 per cent) and sugar production (5.3 per cent) increased over the year.

Similarly, mahogany production rose significantly, while woodchips, pine wood, sawn timber and gold output fell in the year to November.

Aggregate demand conditions remained soft as suggested by partial indicators for consumption and investment.

In the year to November, commercial banks’ new consumption lending contracted by an annual 6.3 per cent, underpinned by lower lending to the wholesale, retail, hotels and restaurants sector and private individuals sectors.

Vehicles registration

Similarly, new vehicle (-25.7 per cent) and second hand vehicle registrations (-21.3 per cent) fell on an annual basis in the same period. In terms of investment activity, commercial banks’ new investment lending shrunk by 16.9 percent in the year to November while domestic cement production (-5.9 per cent) and cement sales (-7.5 per cent) noted annual contractions cumulative to October. Also, up to the September quarter, the value of building permits and completion certificates issued declined by 21.6 per cent and 47.5 per cent, respectively. Employment prospects as indicated by the RBF’s Job Advertisement Survey noted a modest turnaround as the number of vacant jobs advertised increased annually by 1.8 per cent in the year to November.

Broad money rose annually (1.2 per cent) owing to growth in both net domestic credit (4.5 per cent) and net foreign assets (NFA) (1.8 per cent).

Increased lending to the private sector (4.7 per cent) influenced the moderate growth in net domestic credit while the annual growth in gross reserves (6.3 per cent) and other foreign assets (4.6 per cent) drove the NFA outturn. Banks’ demand deposits or excess liquidity in the banking system remained sufficient, and as at 30 December,

was $590.1 million, down slightly from $614.5 million at the end of November.

In November, the Fijian dollar (FJD) strengthened against the Australian dollar (AUD) (1.3 per cent) the Euro (0.9 per cent) and the Japanese Yen (JPY) (0.1per cent) but weakened against the New Zealand (NZD) (-1.1per cent) and US (-0.5 per cent) dollars from the previous month.

Annually, the FJD appreciated against the AUD (4.0 per cent) and NZD (2.9 per cent) but fell against the Japanese Yen (-6.9 per cent), the USD (-3.6 per cent) and the Euro (-0.2 per cent).

Exchange rate

Fiji’s overall exchange rate remained relatively stable as the Nominal Effective Exchange Rate (NEER)2 noted only a marginal increase over the month in November (0.02 per cent).

However, the Real Effective Exchange Rate (REER)3 index declined over the month (-0.3 per cent) and over the year (-2.9 per cent), denoting a gain in trade competitiveness, due to negative domestic inflation in November.

In the year to October, total exports (excluding aircraft) rose by 2.2 per cent underpinned by growth in re-exports, while domestic exports declined mainly due to lower exports of sugar, woodchips and manufactured goods.

In the same period, imports (excluding aircraft) fell by 5.6 per cent attributed to lower imports of machinery and transport equipment (excluding aircraft) and chemicals.

Consequently, the merchandise trade deficit (excluding aircraft) narrowed by 10.4 per cent to $2,559.3 million, compared with a widening of 25.2 per cent in the corresponding period in 2018.

Inflation

Annual inflation stood at -0.3 percent in November, compared to -0.9 per cent noted in October and significantly lower than the 5.1 per cent recorded in the same month in 2018.

This is largely attributed to annually lower prices recorded for the communication; alcoholic beverages; tobacco and narcotics and housing; water; electricity gas and other fuels categories.

Over the month in November, foreign reserves rose by $6.4 million to $2,190.0 million, sufficient to cover 5.1 months of retained imports of goods and non-factor services (MORI). As at 31 December, foreign reserves was $2,226.7 million, sufficient to cover 5.2 MORI.