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Global Economic Activities Expected To Remain Subdued

Global economic conditions are expected to remain subdued in 2017, led by slow recovery in emerging and developing economies. However, sentiments for advanced economies signal favourable conditions, especially for the
28 Feb 2017 10:57
Global Economic Activities Expected To Remain Subdued
RBF

Global economic conditions are expected to remain subdued in 2017, led by slow recovery in emerging and developing economies.

However, sentiments for advanced economies signal favourable conditions, especially for the United States (US), Japan, New Zealand (NZ) and the United Kingdom.

Domestically, latest sectoral data depicted mixed performances.

Visitor arrivals rose notably by 12.5 percent in January this year driven by strong arrivals from New Zealand, China while increases were also noted from Australia, US, Pacific Islands and the Rest of Asia.

Electricity generation increased (+3.5 per cent) in 2016 while garment production was higher (+10.4 per cent) in the cumulative to June, 2016 period.

On the contrary, gold production dipped on an annual basis by 47.1 percent in January due to down time for maintenance of mining machinery.

Similarly, woodchip production declined by 89 percent, in January while log production fell by 35.9 percent in 2016 due to unfavourable external demand.

Consumption activity rose in the review period. Higher registrations of new (+30.3 per cent) and second hand (+1.6 per cent) vehicles, mainly associated with the change in duties in the current fiscal year, were noted in January when compared to the same period last year.

In 2016, commercial banks’ new lending for consumption purposes grew by 7.9 percent along with imports of consumption related goods (+14.7 per cent)).

Partial indicators for investment remained buoyant as noted in the strong growth in imports of investment goods (+15.7 per cent) and domestic cement sales (+11.1 per cent)) in 2016.

Similarly, the number of building permits issued were higher (+2.1 per cent) cumulative to September, 2016), signalling the likelihood of increased construction activity in subsequent quarters.

On the downside, commercial banks new investment lending fell by 10.3 percent in 2016, in contrast to the 77.7 percent increase in 2015 due to base effects.

The contraction this year was led by the lower credit to both the real estate (-17.9 per cent) from 86.4 per cent)) and the building and construction (-1.0 per cent) from 68.1 per cent)) sectors.

Financial conditions continue to be influenced by annual slowdown in credit, largely driven by the slower growth in commercial banks’ lending to the private sector.

Private sector credit growth slowed to 12.6 per cent ($756.4m) from the 14.4 percent ($758.2m) noted in 2015.

This reflected the lower outturn in both commercial banks’ new and outstanding annual lending growth in 2016, which fell to 6.2 percent ($145.8m) and 9.2 percent ($506.6m), respectively.

At the same time, interest rates on commercial banks’ new lending and deposit rates generally rose in the review period.

The weighted average new lending rate increased to 6.17 percent in December 2016, from 5.38 percent in November but fell from 6.77 percent in December 2015.

Feedback:  ivamere.nataro@fijisun.com.fj

 

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