Fiji's activity indicators have improved, but growth remains below potential because of the external financing constraint.
This was the report of the ANZ quarterly review that forecast growth to be around 2.5 per cent with the risks on the downside.
"Cement and gold production output rose in the first eight months of 2012 while sugar production from late June to August rose by 10.2 per cent," the review said.
However, it recorded that electricity production fell from January to August by 0.5 per cent.
"Domestic cement sales, used as a proxy of domestic construction activity showed a 5 per cent growth for January to August 2012," the review said.
"Credit momentum picked up, supporting investment. Net domestic credit growth as of August was 5.0 per cent, mainly from higher private sector credit."
The bank said consumption looked to have been robust through August.
"VAT collections are up 14.2 per cent.
"Retail sales for 2012 will likely rise 8.9 per cent as indicated by the June 2012 Reserve Bank of Fiji's Retail Sales Survey, up from the previously anticipated 3.3 per cent," the review said.
"New consumption lending rose significantly by 123.2 per cent from January to August 2012, driven by loans to wholesale, retail, and the hotels and restaurants sectors," the review said.
"The Fiji dollar has been unchanged over the past year on a nominal effective basis (against the basket of trading partner currencies)."
However, it has risen 2.4 per cent on a real basis.
While growth should be above earlier expectations this year (2.5 per cent) ANZ forecast a below potential rate of expansion until the external financing constraint is eased.
Global trade developments suggested that the risks to our forecast are on the downside.