Fiji maintains rate as 2017 growth forecast revised up

    Fiji’s central bank kept its Overnight Policy Rate (OPR) at 0.50 percent – unchanged since October 2011 – and confirmed last week’s upward revision of its 2017 growth forecast to 3.8 percent from October 2016′s forecast of 3.6 percent.
     The Reserve Bank of Fiji also said its dual monetary policy objectives remain intact, with inflation easing to 4.1 percent in April from 5.6 percent in March, and foreign reserves of $2.240 billion as of May 25, up from $1.991 billion as of March 30, sufficient to cover 5.6 months of imports.
     Fiji’s economy was hit hard in February 2016 by Tropical Cyclone Winston, the worst ever cyclone in the Southern Hemisphere, resulting in higher inflation from a shortage of some food items, including the national drink of yaqona.
      Inflation this year will continue to be affected by domestic supply shortages but price hikes in the wake of the cyclone are expected to taper off, with inflation expected to fall to 3.0 percent by the end of this year as supply normalizes for most agricultural products, according to Barry Whiteside, central bank governor.
      The outlook for Fiji’s economy has improved this year due to the spill-over of last year’s reconstruction from cyclone-related damages, especially the construction sector, and the wholesale and retail sector benefitting from increased sales of hardware and related building items.
     Except for the sectors of fishery, forestry and mining, all other sectors are supported by buoyant consumption and improving investment activity. Manufacturing will be underpinned by an expected rebound in cane production, Whiteside said.
     Last week the central bank revised upward its 2017 growth projection and maintained its 2018 growth forecast of 3.0 percent compared with 2016′s estimated growth of 2.0 percent.
     For 2019 the economy is forecast to grow 2.9 percent.
     Fiji’s 2017 current account deficit, excluding aircraft, is forecast around 5.4 percent of Gross Domestic Product but the capital and financial account balance is expected to show a bigger surplus than the 7.0 percent of GDP previously forecast due to higher inflows of foreign direct investment and the disbursement of a US$50 million loan from the Asian Development Bank for cyclone-related recovery work, the central bank said last week.



    The Reserve Bank of Fiji issued the following statement:

“At its monthly meeting on 25 May, the Reserve Bank of Fiji Board agreed to maintain the Overnight Policy Rate at 0.5 percent.