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Broad-based growth expectations

Filipe Naigulevu
Friday, January 12, 2018

GROWTH expectations in Fiji for this year remains largely broad-based, with a better growth prospect of 3.6 per cent compared with earlier forecasts, the central bank earlier forecasted.

But the World Bank — in its recent flagship January 2018 Global Economic Prospects report — has estimated real gross domestic product (GDP) growth at 3.5 per cent.

And while the Reserve Bank of Fiji expects the growth trend to remain around similar levels for the next two years, the World Bank has forecasted real GDP growth at 3.3 per cent in 2019 and 3.2 per cent in 2020.

The RBF in its Monetary Policy Statement December 2017 had also forecasted a favourable near to medium term outlook for the domestic economy.

This is with expectations that the central bank's twin objectives — of low inflation and adequate foreign reserves — remain intact and positive growth projected over the medium term despite some downside risks.

And although global commodity prices have remained largely muted, the recent supply cuts and rising political tensions in Saudi Arabia is placing upward pressure on global fuel prices.

Apart from raising downside risks to the inflation outlook, the central bank stated that higher global fuel prices could potentially worsen Fiji's terms of trade and balance of payments position.

Fiji's vulnerability to the adverse effects of natural disasters could also undermine economic growth prospects and disruptions to fiscal sustainability.

Extended supply shortages, as recent experiences showed, in agricultural market items post natural disasters could also cloud inflation expectations.

Other risks also include a lower-than-expected uptake of capital spending by Government which poses a downside risk to the growth outlook including weaker performances of traditional sectors.

To mitigate and buffer these risks, the RBF will continue to closely monitor developments in the financial sector particularly credit to account for vulnerabilities to financial stability and Fiji's growth outlook.

This will include key policy considerations such as enhanced micro and macro prudential measures, increased monitoring of the effects of budgetary policies on inflation and foreign reserves.

Aggregate demand outcomes are expected to remain upbeat into the medium-term supported by the expansionary 2017/18 National Budget policies.

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