THE United Nations has encouraged competitive exchange rates among Pacific Island economies.
The suggestion was made in a report, Economic and Social Survey of Asia and the Pacific 2012, which was commissioned by the UN's Economic and Social Commission for Asia and the Pacific.
Launched in Suva last night, the report urged competitive exchange rates among the Pacific Island economies because of their dependence on exports of primary products and tourism.
"Maintaining the competitiveness of their exchange rate is vital in the current economic environment," the report said.
According to the report, Pacific island economies continued to face tremendous challenges with fiscal management with many countries running budget deficits.
"Higher than expected revenues in 2011 did, however, contribute to improvements in the fiscal balances of many economies in the subregion.
"While monetary policy is primarily used for preserving international reserves as a result of fixed exchange rates in most economies in the Pacific, some countries have tried to lower official cash rates to reduce interest rates and stimulate investments aimed at promoting economic activity," the report said.
The report pointed out persistent account deficits and said Pacific Island economies faced high and rising account deficits, reflecting general weakness in merchandise exports.
The economic performance of the Pacific Island developing economies as a group was expected to slacken slightly in 2012, the report said.
But like other Pacific Island economies, projected improvements in Gross Domestic Product growth was expected for Fiji in 2012, the report said.