Fiji inflation falls to -0.3 per cent

May 20, 2009 07:11:29 PM

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Fiji’s inflation rate fell from 0.5 per cent in March to negative 0.3 per cent in April, the Reserve Bank’s economic review for the April month-end revealed.

The report said following the 20 per cent devaluation earlier this year, prices of most goods and services are expected to rise in the coming months.

However, the economic review said this increase in inflation would be temporary and start to moderate from the beginning of 2010.

“Additionally, the devaluation and other exchange control measures undertaken since 15 April 2009, has seen an immediate improvement in the level of foreign reserves. As at 19 May, foreign reserves stood at nearly F$629 million,” the report said.

The RBF said over the year to April 2009, the nominal effective exchange rate (NEER) index fell by 13.0 per cent compared to a 0.8 per cent growth in the same period last year - the sharp decline on account of the recent devaluation.

“The real effective exchange rate (REER) index declined (on an annual basis) for the third consecutive month by 15.1 per cent. This is on account of both the devaluation of the Fiji dollar and yet another decline in domestic inflation, from 0.5 per cent in March to -0.3 per cent in April.

“The fall in the REER index indicates an improvement in Fiji’s international competitiveness relative to major trading partners,” the review said.

“The improvement in Fiji’s competitiveness should bode well for our exports of goods, as well as for services, such as tourism.”

Meanwhile, in light of the global economic developments, all of Fiji’s major trading partner countries are expected to contract in 2009.

“Largely, due to the adverse effects of the global slowdown, plus the impact of the recent floods, the Fiji economy is expected to contract by 0.3 per cent this year,” the RBF said.