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IMF Experts Forecast Positive Outlook For Fiji

Risks noted to be broadly balanced and largely related to external development in terms of trading partners The International Monetary Fund (IMF) has forecast a positive and favourable outlook for
29 Oct 2015 12:58
IMF Experts Forecast Positive Outlook For Fiji
From left: IMF economist working on Fiji, Ikuo Saito, IMF Executive director for Southeast Asia Voting Group, Marzunisham Omar , IMF’s Article IV Consultation Mission Chief for Fiji, Roberto Guimarães, IMF economist working on Fiji, Gee Hee Hong and IMF representative in Fiji, Petaia Tuimanu. Photo: RACHNA LAL

Risks noted to be broadly balanced and largely related to external development in terms of trading partners

The International Monetary Fund (IMF) has forecast a positive and favourable outlook for the Fijian economy over the next couple of years and beyond.

The projections are in line with the Fijian Government forecast.

This follows the conclusion of IMF’s Article IV Consultation with Fiji which began mid this month involving the wide range of officials public and the private sector.

The Consultation Mission Chief for Fiji, Roberto Guimarães, highlighted this during a press conference in Suva yesterday.

The Mission has noted that the growth momentum that our economy is going through has been exceptionally strong.

The IMF expects growth this year to be at 4.3 per cent and expects some moderation going into next year however, the forecast is for growth to remain strong even next year.

Mr Guimarães said they noted growth propelled by several drivers which included very high levels of public investment which has become a catalyst for private sector activities.

The Mission has also noted strong tourism earnings and remittances.

“The public investment is being done in a very prudent fashion, in a way that preserves the credibility of fiscal policy but also ensures that public debt is sustainable,” he said.

“Tourism earnings and remittances have been very strong and have surprised us on the upside.”

Mr Guimarães said factors such as lower oil prices alleviated pressures on the balance of payments and has contributed to a very strong reserve position.

“The robust credit growth which has been a result of strong investment but has also propelled domestic demand in the economy and growth.”

 

The risks

Despite the positive outlook, there are bound to be risks but Mr Guimarães highlighted the risks were broadly balanced and largely related to external development.

“Fiji’s growth is subject to risk that trade partner’s growth would be lower for example China has been slowing down to a more sustainable growth level in IMF’s view,” he said.

“But it is a slowdown nonetheless. That slowdown in China can have effects on Australia and New Zealand because there are strong ties related to exports from Australia and New Zealand to China.

“That slowdown in China has had an effect on activity in Australia and New Zealand and that can affect growth outlook of Fiji.”

The second risk is the exposure to natural disasters which in addition to loss of lives, would also been fiscal cost.

“Fiji, given its geographic location and some of the trends that can be observed, remains exposed to natural disasters and that could affect growth in the medium term,” Mr Guimarães said.

 

Medium term outlook

The IMF suggested sustaining growth in medium term will depend on the timely and effective implementation of reforms.

Mr Guimarães said those reforms should continue to be aimed at bolstering the business climate, reducing the cost of doing business in Fiji and raising private sector investment.

“Public investment has been a catalyst for private sector activities and we see that as a very good thing and development,” he said.

“In this catalyst role, it is also important that going forward, public sector will increasingly crowd in and attract more private investment which will ultimately foster private sector development.

“And help on poverty alleviation, making growth more inclusion and increasing the living standards of the Fijians.”

 

Policy recalibration

The IMF indicated a very important consideration which needs to be taken is a recalibration of policies – monetary and fiscal.

“We see the need for medium term consolidation on the fiscal side,” he said.

“So in other words, the high investment now is a down payment to lay the foundation for very sustainable and stronger growth in the medium term.

“But on the monetary side, we see the case for some normalisation of monetary policy.

“If you look at interest rates once your adjust inflation and you compare with other country’s interest rates are relatively low.

“That has helped fuel a credit growth which has been very high consistent with the economic cycle.

“But also that could be moderated to make sure that growth over the medium term is on a sustainable footing. So we see that as critical to maintaining medium term growth.”

Feedback:  rachnal@fijisun.com.fj

 




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