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RBF Notes Downside Risks For Our Exports, Tourism And Remittance

The Reserve Bank of Fiji says the ongoing weakness in global demand remains a downside risk for Fijian exports, tourism and remittance sectors. RBF Governor, Barry Whiteside, made these comments
30 Apr 2016 08:00
RBF Notes Downside Risks For Our Exports, Tourism And Remittance

The Reserve Bank of Fiji says the ongoing weakness in global demand remains a downside risk for Fijian exports, tourism and remittance sectors.

RBF Governor, Barry Whiteside, made these comments as he announced the board’s decision to maintain the Overnight Policy Rate at 0.5 per cent.

Tourism is a critical aspect of our economy contributing 35 per cent of our gross domestic product and was the largest foreign exchange earner.

However, there is great potential in remittance as well which is now our second largest foreign exchange earner given the growing number of Fijian abroad now.

Despite the risks, Mr Whiteside said windfall gains from the current low global commodity prices, particularly for oil augurs well for many of our key sectors.

“The Fijian economy is still on track to achieve its seventh year of growth this year, albeit at a slower pace than earlier expected due to the negative impacts of the recent natural disasters and weak trading partner demand,” he said.

Mr Whiteside said latest indicators suggest mixed sectoral performances.

“While better-than-expected performances were recorded by the tourism and mining sectors up to March, declines were noted for the timber and fish industries for the March quarter and the first two months, respectively,” he said.

“Nevertheless, disaster related assistance including member withdrawals from the Fiji National Provident Fund, coupled with rebuilding and rehabilitation efforts are expected to stimulate consumption and construction activity in the economy.

“Furthermore, the current situation of favourable monetary conditions and record low interest rates, are expected to provide further impetus for investment and growth.”

 

Inflation and foreign reserves

Mr Whiteside said amidst these developments, the twin objectives of the Reserve Bank remain intact.

“Despite the supply-side shock from Tropical Cyclone Winston and the recent flooding, inflation has remained low, falling to 0.8 per cent in March from 1.2 per cent in February,” he said.

“Year-end inflation is forecast at around two percent, which takes into account the subdued imported inflation emanating from lower crude oil prices, and the subsequent reductions in domestic fuel prices.”

Foreign reserves are currently (28 April) $1,984.0 million, sufficient to cover 5.6 months of retained imports of goods and non-factor services.”

Mr Whiteside stressed: “Given the weak global outlook and adverse effects of the recent spate of natural disasters, supporting economic recovery is vital, while at the same time safeguarding the Bank’s twin objectives.

“In this regard, the Bank will continue to closely monitor economic developments to identify any potential risks to our monetary policy objectives that would warrant a change in monetary policy.”

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