Business

Waqabaca says trade deficit an indicator of investment

By RACHNA LAL and RANOBA BAOA There may be concerns regarding the widening trade deficit (more import less export), but Government believes there are still some positives to this. Permanent
03 Feb 2014 10:33

Permanent Secretary for Finance, Filimoni Waqabaca.

By RACHNA LAL and RANOBA BAOA

There may be concerns regarding the widening trade deficit (more import less export), but Government believes there are still some positives to this.
Permanent Secretary for Finance, Filimoni Waqabaca, has stressed imports is an indicator of investment activities taking place in the country.
“We’ve watched that revenue collection on VAT is increasing,” he said.
“This indicates that there is a lot of consumption as well and this put together shows that economy is on track with the three per cent growth this year.”
The Reserve Bank of Fiji in its January Economic Review established that the trade deficit (excluding aircraft) widened significantly by 34.6 per cent cumulative to October.
This was as imports pressed ahead while exports slumped.
The report said: “Import growth of 10.8 per cent stemmed from increases in investment, consumption and intermediate goods.
“In contrast, the nine per cent decline in exports (excluding aircraft) was because of lower earnings from re-exports, gold, sugar, textiles, mineral water, coconut oil, timber, ginger, and other domestic exports.
“Notwithstanding the deterioration in the trade deficit, the current account position continues to be supported by healthy inflows of tourism earnings and personnel remittances.”

Lending up
Meanwhile, Government is confident of the achieving the forecasted economic growth of three per cent this year given the level of foreign and local investment to date.
Mr Waqabaca said this was evident in the lending number by commercial and development banks.
“We see that investment is still growing strongly. We noticed that the banks have started lending compared to what was the case in 2011,” he said.

Investment rising
The Reserve Bank’s January Economic Review was also consistent with Mr Waqabaca’s comments.
The report said investment indicators remained largely positive during 2013 evidenced by favourable performances in the construction sector, the surge in new investment lending and acceleration in imports of investment goods.
It said domestic cement sales, a partial indicator for construction activity, expanded by 15.7 per cent cumulative to November, indicating a pick-up in the local construction industry.
“In addition, bank lending for investment purposes rose over the same period last year as a result of higher disbursements to the real estate and building and construction sectors,” the report said.
“Furthermore, imports of investment goods also increased by 25.8 per cent, in the first ten months of 2013.”

Liquidity and foreign
reserves
The central bank said liquidity in December stood at $598.3 million having noted a slight decrease compared to November, owing to the decline in foreign reserves.
The report highlighted as of January 30, liquidity is around $643.3 million.
Foreign reserves continue to be at comfortable levels and were around $1,763 million as at January 30, sufficient to cover 4.7 months of retained imports of goods and non-factor services.




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