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The Reserve Bank of Fiji says the expected year-end inflation rate of 2.0 percent may be revised upward in light of emerging risks in the domestic and external sectors.
In its economic review for January, the RBF said inflation in January was 6.3 percent and the impact of the devaluation on prices is expected to continue in the next few months.
“The recent weakening of the Fiji dollar against the Japanese Yen, Australian and the US dollar, the upward revision in the average trading partner inflation for 2010, the supply shortage of market items after Cyclone Mick and the expected recovery in the domestic sector are expected to add to price pressures in the next few months,” the RBF said.
Fiji’s economy is still anticipated to achieve earlier forecasts of a “modest recovery of 1.9 percent” in 2010.
The growth is expected to be led by the manufacturing, agriculture and forestry, financial intermediation, wholesale and retail trade, hotels and restaurants, construction, mining and quarrying, real estate, fishing and other community, social and personal services sectors, the RBF said.
It said that the positive outlook for Fiji’s economy is supported by the economic recovery in selected trading partner countries, with an expected pick up in export demand and higher visitor arrivals.
In the production sector, gold output gained momentum in 2009.
“Recent data from the Vatukoula Gold Mines Limited (VGML) showed that a total of 35,062 ounces was produced in 2009, a yearly growth of 59.4 percent. Investment in new capital machinery and equipment by VGML and the venture into surface mining have contributed largely to this growth.”
“A positive outlook is expected for the tourism industry in 2010, based on improvements in visitor numbers in the latter half of 2009 and supported by the introduction of new airlines and routes, discounted package deals, active promotions, campaigns and advertising by Tourism Fiji.”
As at February 2010, foreign reserves were $1,069 million, equivalent to around 3.4 months of imports.
The RBF also said recent monetary aggregate data indicated an improvement in liquidity conditions.
Liquidity was $319.3 million at February end.
“Consistent with this, broad money rose annually by 8.4 percent in January, compared with a 6.9 percent expansion recorded for the same period in 2009. This increase was underpinned by expansions in time, savings and demand deposits together with a rise in currency in circulation. However, domestic credit fell by 3.2 percent in the year to January, compared with a growth of 5.5 percent recorded in the same period in preceding year. This was attributed to a decline in credit extended to the government, which fell by 32.2 percent, followed by a decline in credit to official entities and the private sector, which fell by 13.9 and 0.02 percent, respectively.”
