Businesses still expect contraction: RBF

September 02, 2009 05:21:02 PM

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Fiji’s central bank says while sentiments for general business conditions are improving, its latest business survey showed most respondents still expect a contraction in business conditions this year.

The Reserve Bank of Fiji (RBF) said in its economic review for August that weak labour market conditions were restraining spending, which it said may be offset to some extent by remittances which increased by 18 percent in the year to June.

The RBF said consumption was subdued in the review period with new vehicle sales falling cumulative to July while imports of consumption goods recorded a marginal decline during the first half of the year.

The merchandise trade deficit narrowed by 8.0 percent to around $870 million in the first half of the year, underpinned by lower imports which more than offset the decline in exports over the same period.

Domestic export earnings fell, cumulative to June this year, led by declines in sugar, mineral water, textiles, garments, timber, footwear, headgear and flour.

These declines, the bank said, more than offset increases in earnings for gold, fish, molasses, sweet biscuits and other domestic exports. Re-exports of mineral fuels declined significantly, contributing more to the fall in total exports.

Foreign reserves of around $924 million at the end of August were higher than the $717 million recorded at July end and were the highest since $912 million recorded in December 2000.

The boost came via a $165 million allocation from the International Monetary Fund, as part of a special IMF allocation of Special Drawing Rights equivalent to $250 billion to member countries, to provide liquidity to the global economic system.

A further $25 million will be received on September 9, with liquidity at $223.4 million at July-end.

The central bank said despite the recent increase in bus and taxi fares, the year-end inflation forecast remained at 9.5 percent and stood at 2.2 percent in July, led by price increases in all categories except transport and heating and lighting.

However, an unspecified increase in imports of investment goods in the first half of the year “reflected improving sentiments in plant and machinery as well as in buildings in the next 12 months”.