FIJI'S economic activity indicators have improved but growth remains below potential because of external financing constraints.
ANZ chief economist Asia-Pacific, Paul Gruenwald, in the Asia Pacific Economics Pacific Quarterly 2013 Report revealed growth should be around 2.5 per cent with risks on the downside.
"Sectoral indicators have been net positive so far this year. 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 year-on-year (y/y)," Mr Gruenwald said.
The report showed electricity production fell from January to August, at negative 0.5 per cent y/y.
"Domestic cement sales, used as a proxy of domestic construction activity, showed a 5 per cent y/y growth for January to August 2012.
"Credit momentum picked up, supporting investment. Net domestic credit growth as of August was 5.0 per cent y/y, mainly from higher private sector credit." He said consumption looked robust through August with VAT collections up 14.2 per cent. Retail sales last year rose 8.9 per cent as indicated by the June 2012 Reserve Bank of Fiji's retail sales survey.
"New consumption lending rose significantly by 123.2 per cent y/y from January to August 2012. It was driven by loans to wholesale, retail, and the hotels and restaurants sectors."
The report indicated labour market conditions improved with a 14 per cent year-to-date increase in the number of vacant positions advertised.
"Inflation remains contained. Prices in September rose to 3.7 per cent y/y with food prices rising 3.1 per cent," it 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 had increased 2.4 per cent y/y on a real basis."
While growth should be above earlier expectations this year (at 2.5 per cent), ANZ forecasted a below potential rate of expansion until the external financing constraint is eased.