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RBF Monitors Global, Domestic Developments Impact On Local Economy

In determining its monetary policy stance, the Reserve Bank of Fiji (RBF) actively monitors both global and domestic developments and their impact on the Fijian economy. This is particularly on
13 Jan 2017 11:00
RBF Monitors Global, Domestic Developments Impact On Local Economy
Sugarcane field in Labasa. Photo: FIJI SUN

In determining its monetary policy stance, the Reserve Bank of Fiji (RBF) actively monitors both global and domestic developments and their impact on the Fijian economy.

This is particularly on the outlook for the bank’s twin monetary policy objectives, foreign reserves and inflation.

Developments during the year show that the global economy continues to grow at a moderate pace, with recent data signalling a further softening in major economies other than the United States.

Inflation remains below target in most advanced economies due to spare capacity while commodity prices remain relatively low.

Consequently, monetary policy stances amongst Fiji’s trading partner economies are expected to remain accommodative for some time.

Looking ahead, the International Monetary Fund projects global growth at 3.4 percent for 2017, following the 3.1 percent expansion forecast for this year.

Domestically, this year’s growth projection was further revised down to 2 percent, from an earlier anticipated growth of 2.4 percent.

The downward revision reflected the larger-than-expected negative impact of both Tropical Cyclones Winston and Zena in February and April this year.

The key sectors negatively affected by these natural disasters were agriculture (especially sugar cane); sugar manufacturing; utilities such as electricity and water and the forestry industry.

Growth is expected to recover to 3.6 percent in 2017.

In spite of the negative shocks earlier in the year, consumption spending has remained strong supported by the various policy initiatives that were implemented post TC Winston.

This includes the Fiji National Provident Fund’s $275.0 million pay-out, and rehabilitation initiatives provided by Government, the donor community and the private sector.

Additionally, the reduction in the value added tax (VAT) rate in 2016, firm labour market conditions and relatively cheaper credit supported the buoyant wholesale and retailing activity this year.

Investment activity remained firm in 2016 with the continuation of some major private sector projects and Government’s infrastructure spending.

Annually, higher value of work put-in-place and domestic cement sales so far this year are indicative of robust construction-led investment activity.

Nonetheless, post TC Winston reconstruction has been affected by delays in the supply of certain building materials.

Labour market indicators show higher recruitment intentions as per the RBF’s Job Advertisements Survey.

And suggest favourable conditions, particularly in the electricity and water; transport, storage and communication; construction and wholesale and retail trade sectors.

While commercial banks’ new credit growth remained positive during the year, this has slowed from a year ago.

Nonetheless, double digit growth in new lending has been noted for licensed credit institutions during the year, given elevated demand for car and personal loans.

 

Feedback:  farzana.nisha@fijisun.com.fj

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