World Bank Warns of Inflation Changing Business Dynamics Soon
Christmas, the months leading up to it, and maybe the months that follow, will be marred with strife for the average worker as belts tighten
against the backdrop of tax increases, and a warning from the World Bank over inflation.
The bank has sounded the warning after the Government increased value added tax (VAT) last week.
It means cutting work hours, staff and even prolong project deadlines.
While it is seen as a one-time increase, the World Bank said inflation could change the nature in which businesses operate.
“We see inflation going up,” said Mehwish Ashraf, a World Bank economist.
“They are resilient. They have their own ways.”
Inflation is an increase in the prices of goods and services in an economy over a period of time.
The Reserve Bank of Fiji said inflation may rise to three per cent in six months.
According to the World Bank’s August 2023 Pacific Economic Update, Fiji is predicated to continue a stable growth exceeding pre-pandemic levels this year.
Inflation is expected to fall below two per cent this year, according to the World Bank’s August 2023 Pacific Economic Update.
But it could change with VAT in place.
Ms Ashraf said it inflation could make business go micro to lessen the impact of inflation.
It can work for some time, but structural plans must be put in place, said Ms Ashraf.
While global conditions have improved since the COVID-19 pandemic and Russia’s invasion of Ukraine, the bank said reducing inflation in major economies was a challenge.
It has resulted in higher inflation in the Pacific, said the World Bank.
The Pacific is predicted to have inflation at six per cent this year.
Tourism could cushion the impact of rising inflation as it has been the backbone of the economy, said Reshika Singh, a World Bank economist responsible for macroeconomics monitoring.
The bank said slower global growth in major trading partners may present headwinds to the Pacific’s recovery prospects, especially for countries that depend on tourism and remittances.
Story by: josefa.babitu@fijisun.com.fj
