Report recommends control over recurrent spending
THE economic outlook released by the World Bank projects Fiji’s gross domestic product (GDP) to moderate to 2.7 per cent in 2019 while inflation is expected to remain at 3.2 per cent, in line with the Reserve Bank of Fiji’s end-year forecast.
Released yesterday, the report also highlighted that liquidity in the banking system (measured by commercial banks) demand deposits had been growing over the past few months, exceeding $600 million at the end of end-August (thanks to the increase in foreign reserves and a decline in statutory reserve deposits).
The Reserve Bank of Fiji had released its economic review earlier this month which showed that as at September 27, liquidity stood at $628.2m.
In terms of recent developments in the economy, the report stated that government debt slightly increased to 47 per cent of GDP, owing to additional borrowing for post-Winston reconstruction. It added that despite higher tourism and transport receipts, the external balance deteriorated in 2018 because of a sharp increase in the trade deficit driven by higher oil prices, low global sugar prices and a strong import demand for capital equipment.
The World Bank’s economic outlook on Fiji said FY2020 budget reflected the commitment to consolidation and was expected to narrow the net fiscal deficit from a projected 3.4 per cent of GDP in FY2019 to 2.7 per cent in FY2020 but recommended tighter control over recurrent spending.
Meanwhile, National Federation Party leader Professor Biman Prasad said the growth projection was a reluctant admission that the Fiji economy was in serious decline.
Prof Prasad said it was not a surprise for them as they had consistently, for the past four years, warned the government to reign its expenditure, borrowing and reckless spending.
“The so called unprecedented growth was based on reckless borrowing and spending for political power preservation by the Fiji First government,” he claimed.
“We have on many occasions questioned the reliability of GDP figures and assessment of the economy by the Reserve Bank of Fiji and those put out by the Government through the Ministry of Economy.
“The recent revised GDP projection for 2019 from 3.4 per cent to 2.7 per cent is again unreliable and unrealistic given the reduction in budget by a billion dollars for 2019-20 budget.
“In fact, we seriously now doubt the revenue and expenditure figures of previous budgets. In the 2018-19 budget, the revenue forecast was $4.2b but this was revised to $3.2b when the 2019-20 budget was presented.
“Given the shortfall in revenue in the past we seriously doubt if the $3.2b revised estimate was achieved,” he said.
Prof Prasad also called on the Fiji Revenue and Customs Service to let the people know what was actually collected in revenue by July 31, 2019.
He said based on the figures highlighted above, the forecast for GDP growth for 2019 was less than 1 per cent.
“We are now in a bind. On one hand, the economy is contracting and on the other we are accelerating that contraction by further reducing expenditure, but as the World Bank says, we really do not have the fiscal space left.”
He claimed the situation “we are in at present is a direct result of mismanagement and reckless policy prescriptions by this government over the last several years.”
We have on many occasions questioned the reliability of GDP figures and assessment of the economy by the Reserve Bank of Fiji and those put out by the government through the Ministry of Economy – Professor Biman Prasad