OVERNIGHT POLICY RATE REMAINS UNCHANGED

The Reserve Bank of Fiji Board at its meeting yesterday, kept the Overnight Policy Rate unchanged at 0.5 per cent.

The Governor and Chairman of the Board, Ariff Ali stated that the decision was based on recent developments in the global and domestic economy, which posed no immediate threat to the Bank’s twin monetary policy objectives of low inflation and adequate foreign reserves.

On the external front, Governor Ali noted that the recent growth projections released by the International Monetary Fund suggests a modest pick-up in global economic activity in 2020.

Global growth is forecast to rise to 3.3 per cent in 2020 from an estimated 2.9 per cent in 2019, down from earlier projections of 3.4 per cent and 3 per cent, respectively. While the recent signing of a trade deal between the United States (US) and

China should ease tensions and enhance manufacturing activity and global trade flows, the recent Coronavirus outbreak along with a re-escalation in the US-Iran conflict and other geopolitical tensions could derail global growth prospects going forward.

Domestically, the Fijian economy is anticipated to expand at a slightly higher rate of 1.7 per cent in 2020, following an estimated growth of 1.0 per cent in 2019.

The growth is expected to be underpinned by the agriculture, information and communication, manufacturing, financial and insurance activities, wholesale and retail and accommodation and food service sectors.

However, headwinds from the global economy coupled with the Coronavirus outbreak and the Australian bushfires could negatively weigh on the economic outturn for this year.

Domestic demand which had been weak throughout last year is expected to recover in 2020 in tandem with economic activity.

Annual inflation stood at a record low of -0.9 per cent in December 2019, compared to the 4.8 per cent recorded in 2018 on account of lower prices in the communication and alcoholic beverages, tobacco and narcotics categories.

Foreign reserves (RBF holdings) are around $2,248.1 million (30/01), sufficient to cover 5.1 months of retained imports of goods and non-factor services and are expected to remain comfortable in the medium-term.

Governor Ali concluded that with the stable outlook for foreign reserves and inflation.

The Bank will maintain its accommodative stance and will continue to closely monitor economic developments as well as risks and align monetary policy accordingly.”