Economic activity picks up, says report
WHILE economic activity almost came to a standstill in the June quarter, it has picked up somewhat with the reopening of businesses and uplifting of some restrictions as widespread vaccination gained momentum across the country.
The Westpac Bank’s Fiji Quarterly Economic Update for October 2021 titled “Fijian economy past the worst: Recovery in sight although caution remains” noted that the economic outlook for the Fijian economy continued to be hindered by the effects of the COVID-19 pandemic, particularly the second wave which hit the country in April this year, leading to a sprawling community transmission, subsequently adding to an already fragile economy with sharp decline in activity.
The Westpac Wave also highlighted that additionally, the economic compass provided by the 2021/22 Government National Budget helped cushion the impact of the pandemic to both businesses and households to some extent.
Based on its economic analysis there is expectation that with widespread vaccination in line with the Government’s target, the economy will reopen (business as usual domestically) in the past two months of this year.
It however noted the uncertainty surrounding international border reopening which remained with the Delta variant of COVID-19 now spreading rapidly across many parts of the world and the detection of the new vaccine-resistant strain of the virus in South America.
“As such, although Government expects international borders to reopen in November, we expect little to no quarantine-free travel for this year, but factoring in widespread vaccination and ongoing fiscal and monetary stimulus, we upgrade our GDP forecast this year and project an economic contraction of 3.8 per cent (from -4.2 per cent anticipated earlier).
“The impact of the Government National Budget adds positively to the economic outcomes for this year and is somewhat offset by the downturn in general economic activity propelled by low business and consumer confidence. For 2022, we project the economy to rebound in any case regardless of the timing of quarantine-free travel or otherwise,” stated the report.
Furthermore, with quarantinefree travel as early as the first quarter of 2022, the bank projects a rebound of 12.5 per cent, with mid-year quarantine free travel, with an expected 10.0 per cent rebound.
“If quarantine-free travel is delayed to the latter part of 2022, we anticipate a 5.5 per cent growth and in the event if there is no quarantine-free travel next year, we still project a recovery driven solely by domestic demand (on the back of herd immunity and the return of local tourism activity).”
With this backdrop the bank believes the economic outlook for 2023 looks promising and they project the Fijian economy to grow further with the return of international tourism, increase in business and consumer confidence and ongoing fiscal and monetary stimulus.
However the bank noted that the overall economic outlook remained uncertain.
It said with the upside and downside scenarios considered present plausible alternative paths for the economy in the medium term based on different underlying assumptions about health outcomes.
“These assumptions affect the extent of domestic activity and easing of restrictions, the consumption response out of savings, and the speed with which international travel recovers.
“It is assumed that Fiji will achieve widespread vaccination of its eligible population as per the Government’s target and effectively contain the pandemic by the end of the year, hence, substantially reduce new cases. However, a more persistent pandemic with new variants, financial sector stress and any natural disaster could derail recovery next year.”
However, a more persistent pandemic with new variants, financial sector stress and any natural disaster could derail recovery next year – Krishal Prasad