SUNBIZ

Our Balance Of Payments Position

Balance of payments is basically the value of an economy’s transactions with the rest of the world. This includes payments in and out of the country for goods, services, primary
24 Sep 2016 07:00
Our Balance Of Payments Position

Balance of payments is basically the value of an economy’s transactions with the rest of the world.

This includes payments in and out of the country for goods, services, primary income, secondary income and capital accounts.

It also shows changes in financial claims on assets and liabilities to the rest of the world.

The balance on current and capital account deficit narrowed in 2015 to $136.5 million from $619.9 million in 2014.

This was due to a decrease in imported goods, increase in tourism earnings, increase in remittances received and increase in reinvestment of profits by foreign owned companies.

The balance on financial account deficit narrowed in 2015 to $532.1 million from $974.3 million in 2014.

This was due to an increase in currency and deposits and a decrease in investment transactions of foreign owned entities.

 

Current account

The current account is one of the main components of the balance of payments.

It is an important indicator about how an economy is running by recording the value of an economy’s transactions with the rest of the world.

This is in terms of goods and services (exports less imports) and primary income and secondary income from abroad.

When the sum of debits is greater than the sum of credits we have a current account deficit or vice versa a surplus.

 

The current account balance was at $142.9 million for 2015p.

Current account balance fell by 77.2 per cent ($485.2 million) when compared to 2014.

The balance on goods and services was a deficit of $264.8 million in 2015. This represents a fall by 60.5 percent ($406.4 million) when compared to 2014.

Imports of goods decreased by $607.0 million mainly due to decrease in mineral fuels.

At the same time, an increase in the value of services exported mainly earnings from tourism also contributed to the improved goods and services balances.

The balance on primary income was a deficit of $424.7 million in 2015. This represents a rise by 3.0 percent ($12.2 million) when compared to 2014 as a result of an increase in the outflow of reinvested earnings.

The balance on secondary income was a surplus of $546.6 million in 2015. This represents a rise by 20.0 percent ($91.0 million) when compared to 2014 due to an increase in personal transfers.

 

Summary 2016 forecast

2016 potentially has an increase in imports of “Goods and services” given cyclone Winston rebuild and the increase in fuel imports.

Suspected to be based not on the price of fuel but the increases of fuel consumption via increase in motor vehicles imported, tourism related travel and accommodation.

On the same token tourism earnings remain the key in offsetting these. “Primary income” reflects individuals or personal outflows namely of expatriates via primary income.

Increases are likely to continue into the future in a wide cross section of the economy from Government to the private sector via construction, finance and the legal fraternity to name a few.

“Secondary income” would definitely increase into the future and could sit well above $600 million this year by simply extrapolating $91 million or so per annum.

Conclusively my take is 2016 will remain the lowest current account deficit barring any upsets in exports.

Mainly around the $200 million deficit mark, just to note deficits are also a good thing.

 

Capital account

This has two components – capital transfers and the acquisition or disposal of non-produced, non-financial assets.

Capital transfers involve the transfer of ownership of fixed assets, or the transfer of funds linked to them, without any counterpart transaction.

Basically, a deficit in capital account can indicate that a country has done more investment in other countries than foreigners have invested in the country.

The capital account balance showed a net inflow of $6.4 million for 2015.

The capital account balance fell by 22.0 percent ($1.8 million) when compared to 2014.

 

Financial account

Records financial transactions involving Fiji claims on assets and liabilities to non-residents.

The financial account is classified into assets and liabilities, which are broken down by type of investment (direct, portfolio, other investment and reserve assets) and instrument of investment.

The financial account balance showed a net borrowing of $532.1 million which consisted of net outflows of $701.5 million in equity and inflows of $169.4 million in debts for 2015.

The financial account net borrowing fell by 45.4 percent ($442.2 million) when compared to 2014.

Direct investment showed a net outflow of $727.1 million in 2015. This represents a rise by 23.7 percent ($139.5 million) when compared to 2014.

Portfolio investment showed a net inflow of $187.8 million in 2015. This represents a rise by 816.1 percent ($167.3 million) when compared to 2014.

Other investment showed a net outflow of $128.7 million in 2015. This represents a fall by 71.5 percent ($322.7 million) when compared to 2014.

Reserve assets showed a net inflow of $135.9 million in 2015. This represents a rise by 207.5 percent ($91.7 million) when compared to 2014.

nThis is an informative publication, sponsored by The Fiji Sun, Fiji Bureau of Statistics and HFC Bank. All views expressed or implied are purely of the Treasurer at the HFC Bank, Peter Fuata.



Fijisun Ad Space


Get updates from the Fiji Sun, handpicked and delivered to your inbox.


By entering your email address you're giving us permission to send you news and offers. You can opt-out at any time.


Fiji Sun Instagram
Subscribe-to-Newspaper