FIJI'S central bank — the Reserve Bank of Fiji (RBF) — says that while the pick-up in consumption and business investment domestically continues to drive the present recovery, recent downturns in trading partner demand can mean lower production and reduced earnings for the economy from some primary exports and remittances.
However, RBF governor Barry Whiteside said the overall expansion for this year was expected to remain above 2 per cent.
This, he said would be driven largely by the continued growth in consumption and investment related activities, evident through higher value added tax (VAT) collections, sales of new vehicles, private sector credit, and value of work put in place as well as domestic cement sales.
Mr Whiteside made these comments while highlighting the outcome of the central bank board meeting on Thursday where it was agreed to maintain the overnight policy rate (OPR) at 0.5 per cent.
He also noted that the escalation in the financial and debt crisis in the Euro zone and persistent weakness in the US that was affecting economic activity globally prompted the International Monetary Fund (IMF) to downgrade its global growth projections for this year and 2013 from 3.9 per cent to 3.3 per cent and 3.6 per cent, respectively.
Mr Whiteside said the downside risks had now worsened and subdued demand in the country's major trading partner economies had the potential to negatively impact the local economy through Fiji's trade and financial linkages.
He said globally, the heightened risks were pushing authorities to maintain fiscal discipline through lower deficits and debt levels, as well as shore up foreign reserves in order to maintain buffers in the possible event of declines in their respective economies.
He added the Macroeconomic Policy Committee was reviewing its April growth forecast of 2.7 per cent for this year.
He said this would take into account the combined impact of continuing buoyancy in domestic demand on the one hand and the deterioration in external demand on the other.