THE Reserve Bank of Fiji board at its monthly meeting last week agreed to maintain the overnight policy rate (OPR) at 0.5 per cent.
Board acting chairman Iowane Naiveli said global economic conditions and prospects remained gloomy although some progress was made by the US government to resolve its fiscal issues early in the review month. Consequently, he said the International Monetary Fund recently cut its global growth forecast for 2013 to 3.5 per cent, down from the earlier forecast of 3.6 per cent in October last year.
"While the US economy has shown signs of modest growth, the Euro zone is still mired in recession. Conditions in China have improved in recent months while in Japan, authorities have introduced further fiscal stimulus to spur growth," Mr Naiveli said.
On the domestic front, he said the Fijian economy was estimated to have grown by 2.5 per cent last year.
The board noted that sectoral performances remained mixed in the final quarter of 2012.
He said weak sectoral outcomes were noted for cane, sugar, gold and visitor arrivals. However, demand continued to be driven by consumption spending as evident by the strong growth in new lending for consumption purposes and domestic Value Added Tax collections whose growth remained upbeat.
Additionally, he said indicators for investment continued to support a positive outlook.
"Nonetheless, this year's economic performance is expected to be marred by the adverse impact of Cyclone Evan on the primary and service sectors, ongoing structural issues in some key industries, and continued softness in global demand.
Inflation was recorded at 1.5 per cent in December 2012, down from the 2.1 per cent noted in November."
He said this was on account of lower prices for some market items and the continuing weakness in the global economy, which translated into lower commodity prices.
"Foreign reserves remain comfortable and are currently (31 January) around $1,602.5million, sufficient to cover 4.9 months of retained imports."
The board further added that given the comfortable level of foreign reserves and inflation, the accommodative monetary policy stance remains appropriate to support an environment for economic growth and development.