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The depreciating US dollar against the Fiji dollar and weaker than expected domestic demand are likely to hold off any significant rise in domestic prices, according to the Reserve Bank of Fiji.
The RBF has made the projection in its November economic update despite what it said would be upward movements in fuel and commodity prices in the world market in the approaching months.
Hence, the central bank’s 2009 year end inflation forecast had been revised down to 7.0 percent, from the 9.5 percent envisaged earlier.
Inflation in October 2009 was 6.3 percent, unchanged from September. In October last year, prices had risen by 8.5 percent.
Since the April 2010 devaluation of the Fiji dollar by 20 percent, prices had increased by 7.6 percent.
The RBF also said that cumulative to September this year, the merchandise trade deficit narrowed to $1,228 million, compared to the same period last year when it was $1,524 million.
The lower deficit was attributed to a decline in imports by 18.7 percent, mainly on account of lower payments for mineral fuels.
Domestic export earnings also fell in the first nine months of the year led by sugar, timber, garments, coconut oil and flour, which the RBF said more than offset the increases from exports of gold, fish, molasses, sweet biscuits, corned meat and other domestic exports.
At the end of November, foreign reserves were $1,071 million, equivalent to around four months of imports.
The RBF said consumption remained subdued during the review period. Cumulative to October, net Value Added Tax (net VAT) collections and new vehicle sales both fell on an annual basis. Other partial indicators include new loans for consumption purposes and import of consumption goods, which both fell in the year to September.
