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RBF: More Businesses Adapted To COVID-19 Environment In June Along With More Activities

More businesses and people adapted to the COVID-19 environment in June. This is according to the Reserve Bank of Fiji’s July Economic Review, led to some noticeable activities. Some highlights
04 Aug 2021 11:00
RBF: More Businesses Adapted To COVID-19 Environment In June Along With More Activities
The Reserve Bank of Fiji

More businesses and people adapted to the COVID-19 environment in June.

This is according to the Reserve Bank of Fiji’s July Economic Review, led to some noticeable activities.

Some highlights from the July Review:

– Resource-based sectors have managed to hold up production in the first half of 2021.

– Gold production expanded annually (+12.1 per cent) driven by mining efficiency and improved ore grade.

– Likewise, timber production rose over the same period as pine logs (+128.0 per cent) and woodchips (+90.9 per cent) output rose on the back of buoyant foreign demand while mahogany production (+91.3 per cent) also noted a significant improvement.

– While the sugarcane crushing data up to 19 July shows annual contractions for both cane (-27.0 per cent) and sugar production (-30.9 per cent), yield is expected to pick up over the coming weeks after the guaranteed price of $85 per tonne was extended for the 2021 season.

– In contrast, electricity generation (-7.2 per cent), cement production (-33.9 per cent) and visitor arrivals (-95.9 per cent) recorded annual declines cumulative to June.

– Despite the domestic economy opening up under strict COVID-19 protocols, aggregate demand remains suppressed as more people have become unemployed or have had their wages and hours worked reduced.

– Partial indicators of consumption spending such as Net VAT collections (-18.2 per cent), new consumption lending by commercial banks (-8.6 per cent), new vehicle registrations (-8.0 per cent) and electricity consumption (-6.1 per cent) recorded annual declines cumulative to June.

– On the other hand, second-hand vehicle registrations (+120.4 per cent) rose over the same period. Investment spending also registered sluggish outcomes in the year to June.

– Commercial banks’ new lending for investment purposes (-18.1 per cent) declined on an annual basis driven by lower lending to the real estate (-20.3 per cent) and the building & construction (-12.1 per cent) sectors.

– The financial sector remains stable despite subdued credit activity and heightened credit risks in the financial system.

– Credit to the private sector contracted (-2.8 per cent) annually in June, while the level of non-performing loans increased further.

– Nonetheless, banks are adequately capitalised and have sufficient provisioning against bad loans to mitigate financial stability concerns.

– Generally, the downward movement in interest rates in recent months is on account of ample levels of banking system liquidity.

– Total banks demand deposits as at 30 July was around $1,548.4 million.

– Tourism earnings in the first quarter of 2021 declined by a significant 99.1 per cent to total $2.8 million, led by negative contributions from all source markets.

 

Annual Inflation
– The annual inflation rate edged up from -1.6 per cent in May to zero per cent in June as the higher prices of food, transport, housing, and fuel perfectly offset the decline in prices of alcohol, tobacco, yaqona and other items.

– Furthermore, local border restrictions and mandatory COVID-19 protocols have resulted in higher prices of some food items and raised the cost of doing business.

– The year-end forecast for inflation of 1.5 per cent is upward biased.

– Foreign reserves remain at adequate levels and at the end of July was $3,116.3 million, sufficient to cover 10.8 months of retained imports.

– The medium-term foreign reserves outlook remains comfortable as the Government will finance a large part of next year’s fiscal deficit through external loans.

– In light of the stable outlook for inflation and foreign reserves and weak domestic economic conditions, the RBF maintained its accommodative monetary policy stance in July by keeping the Overnight Policy Rate unchanged at 0.25 per cent.

– The Reserve Bank also provided an additional $200 million allocation to the Disaster Rehabilitation and Containment Facility to help businesses maintain their operations and support employment during this pandemic.

 

Challenges
The economic uncertainty and mandatory COVID-19 protocols are anticipated to suppress investment plans further in the coming months.

“Labour market conditions remain weak in tandem with the economic downturn.”

“Economic activity slowed significantly in late April and May as the spread of the Delta variant intensified and worsened the country’s socio-economic situation,” the central bank says.

 

Feedback: maraia.vula@fijisun.com.fj



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