Economy to contract further
THE central bank says the balance of risk to the current economic outlook is heavily tilted to the downside with the second wave of the coronavirus outbreak of the highly contagious Delta variant in Fiji having thwarted all chances of an economic recovery this year.
Reserve Bank of Fiji governor and chairman of the Macroeconomic Committee, Ariff Ali said the localised lockdowns in Viti Levu, restrictions on certain economic activity and movement of people, and the mandatory “COVID 19-safe” operational requirements for many businesses had further curtailed economic activity and raised the cost of doing business.
Mr Ali said the high unemployment and under-employment situation had also worsened from last year with Government finances taking another hit, thereby further suppressing domestic demand.
“Given these developments, the economy is forecast to contract further by 4.1 per cent this year, driven by the services and industrial sectors, which are expected to more than offset the positive contributions from the primary sector.
“From next year, economic recovery is expected on the assumption that the current outbreak is controlled, herd immunity is achieved through vaccination, and borders re-open towards the latter part of 2022.
“Hence, growth is expected to rebound to 6.2 per cent in 2022 and accelerate to 8.0 per cent in 2023. While the economic recovery from next year is contingent on the resumption of tourism activity, visitor arrivals are not expected to return to pre-pandemic levels for some time,” he said.
The governor also stressed that economic recovery was critically dependent on the successful containment of the outbreak in the near term and the re-opening of borders for international tourism as local conditions allow.
“In this regard, a large part depends on achieving herd immunity by ramping up our current vaccination efforts. It is encouraging to note that around 50 per cent of our adult population have already received the first dose of the vaccine.
“Based on the current inoculation trend, Fiji will be close to herd immunity by the end of October this year.”
He said it was critical for macroeconomic policies to remain geared towards adequately resourcing the health and other frontline agencies to contain the pandemic while at the same time ensuring adequate social protection for households impacted by the outbreak and the containment measures, adding that carefully re-opening businesses within the required health and safety parameters was also crucial for maintaining jobs and livelihoods.
On a positive note he highlighted the improvement in Fiji’s external position in terms of our foreign reserves which stood just over $3.1 billion, boosted by lower imports; increased personal remittances and official aid; external borrowing by the Government; and the sale of Energy Fiji Ltd’s shares.