Growth on track
28 October, 2016, 12:00 am
WHILE the economy is on track to achieve its seventh consecutive year of positive growth this year, some sectoral performances have been lower than expected, says Reserve Bank of Fiji governor Barry Whiteside.
Mr Whiteside said this indicated a downward bias on the current growth projection of 2.4 per cent.
Mr Whiteside said yearly growth in visitor arrivals and remittance inflows, while staying positive, had both trended below forecast.
He said in particular, tourist numbers from Australia were lower over the year which was being offset by strong increases from other markets especially New Zealand and China.
At its monthly meeting yesterday, the RBF board agreed to maintain the current accommodative monetary policy setting, leaving the overnight policy rate unchanged at 0.5 per cent.
“Among other sectors, sugar, timber and fish production have declined due to Tropical Cyclone Winston and down time from planned mill upgrades.
“Despite higher capital spending allocated in the 2016/2017 National Budget for reconstruction activity, shortages of essential building materials have led to delays in some major construction works, resulting in expected slower project implementation this year,” he said.
He said the overall positive growth was reflective of strong performances in other sectors such as electricity and gold.
Mr Whiteside said consumption and investment activities remained positive, supported by continued accommodative financial conditions, remittance inflows and favourable labour market conditions.
Meanwhile, the statement from the RBF said foreign reserves were about $1,983,600 million (27 October 2016), sufficient to cover 5.5 months of retained imports of goods and non-factor services.
It said headline inflation rose for the fifth consecutive month in September to 5.6 per cent as a result of supply side constraints.
“This was underpinned by higher prices in the alcoholic beverages, tobacco and narcotics category which accounted for two thirds (3.7 percentage points) of overall inflation — particularly for yaqona, food and non-alcoholic beverages and education.”
According to the RBF, high yaqona prices have persisted and unexpectedly grew further in September and if prices remained at similar levels, there was a higher likelihood of continued inflationary pressure towards the end of 2016.
It said consequently, the 2016 year-end headline inflation forecast was revised upward to 5.0 per cent from the 3.5 per cent expected earlier.
Excluding the impact from higher prices of volatile items such as food, yaqona and energy, underlying inflation for September was about 3.3 per cent.