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Growth prospects up

Monika Singh
Saturday, May 20, 2017

THE upward revision of economic growth paints a more optimistic picture of Fiji's growth prospects compared with the earlier prediction, says academic Dr Neelesh Gounder.

Dr Gounder's made the comment after the latest announcement by the Reserve Bank of Fiji that the Fijian economy was expected to grow by 3.8 per cent this year, an upward revision from the October 2016 forecast of 3.6 per cent — a growth of 0.2 per cent.

RBF governor and chairman of the Macroeconomic Committee, Barry Whiteside, said, "with the exception of fishing, forestry and mining, most sectors are expected to improve this year with the services sector envisaged to drive the economic activity".

"Overall, the sectors expected to lead the growth in 2017 include manufacturing; financial & insurance activities; construction; wholesale & retail trade; and transport & storage," he said yesterday.

Mr Whiteside said improved growth in the manufacturing sector would be underpinned by an expected rebound in cane production which in turn will mean higher manufacture of sugar.

"Added to this will be expected increases in the processing and preserving of poultry, dairy products, biscuits and mineral water production. Greater activity within the financial sector coupled with the continuing accommodative monetary policy stance of the Reserve Bank, are expected to further contribute to growth," he said.

"The construction sector is anticipated to record a higher growth with major post TC Winston related reconstruction work spilling over from 2016 into 2017. Consequently, the wholesale and retail trade sector is also forecast to gain from increased sales of hardware and related building items.

The transport and storage sector is expected to benefit from additional flights/routes by Fiji Airways into Adelaide and San Francisco and the establishment of code sharing arrangements on the Singapore and Hong Kong route with Jet Airways."

Mr Whiteside said the growth forecast for 2018 remained unchanged at 3.0 per cent.

"All sectors are expected to register positive growth with major contributions emanating from the manufacturing, transport and storage and financial and insurance sectors. In 2019, the economy is envisaged to grow by 2.9 per cent."

Dr Gounder, who is a senior lecturer at the School of Economics, Faculty of Business and Economics at the University of the South Pacific, said it wasn't surprising that the forecast by the RBF was largely on the back of services sector which was predicted to drive economic activity.

"Within the revised forecast and the short-term growth outlook, slack in the economy has been mainly identified in primary sectors such as fishing, forestry and mining," he said.

"With growth forecast for 2018 remaining unchanged at 3 per cent, concerns remain regarding durability of growth in the medium term, in particular, creating the ability of manufacturing and agriculture to contribute towards a higher growth rate," he said.

Dr Gounder said policy support and fundamental structural changes were needed for the agriculture sector, where majority of the poor were concentrated.

Meanwhile, the Fiji Commerce and Employers Federation welcomed the revised growth and CEO Nesbitt Hazelman said it showed that the economy was buoyant and growing.

Mr Hazelman said the building and construction industry had picked up with more jobs being created, which meant improvement in the employment sector.

He said the increased borrowing from local banks and financial institutions meant businesses were growing and highlighted the resilience of the Fijian economy which had the ability to bounce back after the devastation from Severe TC Winston.

The growth of the economy and the increased capital investment by the Government had also renewed the private sector's confidence in the economy.

Meanwhile, on the external sector, Mr Whiteside said, "Fiji's trade deficit is expected to widen to 22.2 per cent of gross domestic product (GDP) this year, and this will be largely offset by higher receipts from services (especially tourism) and remittances.

"The current account deficit (excluding aircraft) is now projected to be around 5.4 per cent of GDP."

Mr Whiteside said developments in the capital and financial account balance were envisaged to have a bigger surplus than previously forecast (7.0 per cent of GDP) on account of higher inflows through foreign direct investment and the disbursement of the $US50.0 million ($F104m) Asian Development Bank loan for TC Winston related recovery work."

He said the prices of commodities such as yaqona were expected to normalise towards the 3.0 per cent forecast for the end of the year.

The RBF had noted a higher annual inflation in April which stood at 4.1 per cent as a result of shortages in the supply of agricultural produce and higher yaqona prices after TC Winston. He said the foreign reserves were about $2,242.2m as at May 19, 2017, equivalent to 6.0 months of retained imports of goods and non-factor services and are expected to remain stable over the remainder of the year.

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