$663.8m deficit
THE Fijian Government recorded a net deficit of $663.8 million (-7.1 per cent of GDP) in the first seven months of the 2020 to 2021 fiscal year to February, as expenditure ($1,742.8m) outweighed revenue ($1079.3m).
This was highlighted by the Reserve Bank of Fiji’s economic review of March.
RBF stated government debt in the same period stood at 73.9 per cent of GDP ($6928.0m) of which domestic debt constituted 54.7 per cent of GDP ($5124.4m), while external debt had comprised 19.2 per cent of GDP ($1803.4m).
It also stated domestic credit decelerated to 1.5 per cent over the year to February, which was because of reduced lending to the private sector (-4.0 per cent), reflecting the elevated credit risks.
These were also said to have mirrored in the 22.4 per cent annual contraction in new lending by commercial banks’ cumulative to February, as lending to the wholesale, retail, hotels and restaurants, real estate, and the private individuals category, declined.
RBF stated the Fijian dollar (FJD) had strengthened against the Japanese Yen (JPY) (3.2 per cent), USD (1.3 per cent) and the Euro (0.9 per cent) over the month in February, but weakened against the New Zealand (NZD) (-1.3 per cent) and Australian dollar (AUD) (-1.1 per cent).
It was highlighted on an annual basis, the FJD gained against the USD (10.0 per cent) and the JPY (6.3 per cent) but was lower against the AUD (-8.0 per cent), NZD (-5.8 per cent), and the Euro (-0.7 per cent).
The Nominal Effective Exchange Rate (NEER) index was higher over the month (0.1 per cent) and year (1.0 per cent) in February which indicated a strengthening of the FJD according to RBF.
The Real Effective Exchange Rate (REER) index was stated to be lower over the month (- 1.5 per cent). However, according to RBF the REER noted a marginal increase (0.6 per cent) over the year which indicated a slight loss in trade competitiveness, given the gains against the USD and JPY.
Meanwhile the trade deficit (excluding aircraft) narrowed (-31.8 per cent) in 2020 to $1982.7m, underpinned by the larger decline imports (-26.4 per cent) compared with exports (-19.0 per cent).
RBF revealed tourism earnings contracted significantly (-84.8 per cent) to $314.9 million last year, given the border closures.
Remittances were also said to have declined annually by 1.4 per cent in February, owing to lower inflows from personal receipts (-4.1 per cent) and immigrant transfers (-0.9 per cent).
With regards to the twin monetary policy objectives of the bank, it was stated the outlook for inflation and foreign reserves was stable. Annual headline inflation turned positive (+1.1 per cent) in February after declining for more than a year.
This was largely influenced by increased prices for local fruit and vegetables because of the impact of Tropical Cyclone Ana and the associated floods as revealed in the review.