Positive growth outlook for Fiji
Global economic conditions remain firm, supported by positive outcomes in major advanced economies, including Fiji’s main trading partners.
This was highlighted by the Reserve Bank of Fiji in its September Economic Review. Global demand is expected to strengthen on the back of faster economic growth while inflationary pressures remain contained.
Commodity prices remain low, softening in the second quarter and are expected to remain relatively steady in the second half of 2017.
Reinforcing the positive growth outlook are the generally accommodative monetary policies among major economies in light of low inflation and modest growth projections.
“Domestically, provisional estimates released by the Fiji Bureau of Statistics
(FBOS) showed growth for 2016 at 0.4 per cent,” the RBF statement said. “The lower than expected growth was largely due to weaker performances in the forestry and fish, real estate, accommodation and financial and insurance activities sectors.
“However, the growth outlook for the next two years remains positive with the economy expected to expand for the eighth consecutive year in 2017.”
To date, sectoral outcomes have been mixed while partial indicators for demand point to strong business and consumer confidence.
“Performances by the sugar and tourism sectors remain positive while gold and timber production grew on a monthly basis but declined on an annual basis. “Aggregate demand remains buoyant as
indicated by increases in partial consumption indicators such as Pay As You Earn (PAYE) collections and net Value Added Tax (VAT) which rose annually by 12.5 per cent and 14.0 per cent, respectively to July whereas new vehicle registrations grew by 2.7 per cent cumulative to August. “Moreover, new lending for consumption purposes rose by 10.5 per cent (to $599.8m) in the year to August 2017.”
Similarly, partial indicators for investment also rose during the review period. Commercial banks’ new investment lending grew by 31.8 per cent ($356.4m) cumulative to August, underpinned by new loans to the real estate (60.4 per cent to $207.8m) and building and construction (5.4 per cent to $148.6m) sectors.
Foreign reserves (RBF holdings) rose by $53.9 million over the month to around $2,406.3 million in September, sufficient to cover 5.9 months of retained imports, led by tourism and sugar receipts.
Financial conditions continue to be conducive for investment and growth.
Private sector credit expanded further by 13.0 per cent ($823.8m) in the year to August driven by the turnaround noted in bank lending
to the wholesale, retail, hotels and restaurants and the pickup in credit growth to the manufacturing, real estate and the mining and quarrying sectors.
Bank liquidity increased to a high of $836.0 million in September. In line with this, commercial banks’ weighted average lending rate was 5.71 per cent in August, below the past 10- year average, while the weighted average time deposit rates generally picked up.
Currently (as at September 28), liquidity is at $803.7 million. Inflationary pressures remain low with annual headline inflation falling further to 1.9 per cent in August, from 2.0 per cent a month earlier.
Higher prices of alcohol and tobacco in the review period were partly offset by restrained crude oil prices and food prices, which have been on the decline for the past four months.
Looking ahead, year-end inflation is now expected to be 2.5 per cent, supported by low commodity prices and subdued trading partner inflation, which would help offset any uptick in prices resulting from the expansionary National Budget policies and adverse weather conditions.