Investment remains subdued: RBF

Business investment remains subdued across all sectors except tourism and resources, says the Reserve Bank of Fiji.

And it hopes a number of tourism and mining projects such as the Denarau Casino Resort, Peppers Naisoso Apartments, and the refurbishment of the Grand Pacific Hotel, and the start of bauxite mining in Nawailevu will boost investment.

The RBF's April Economic Review says other ongoing construction projects should firm the investment outlook and create job opportunities.

“As it is, the labour market remains weak as evident by the marginal growth (1.1%) in the number of vacant positions advertised in the first quarter,” the RBF Review said.

It said financial conditions, on balance, are improving as evident by the yearly rise in domestic credit by 2.3 per cent in March, underpinned by the steady growth in private sector lending.

While the acceleration in outstanding bank credit (7.3%) in the year to March was led by business credit growth, the RBF said total deposits growth (16.5%) outpaced credit expansion in the review period, indicative somewhat of business and household preference to hold their assets in deposit.

While the Fiji Government increased reconstruction in its rehabilitation efforts after the floods of the first quarter, together with some temporary boost to spending as businesses and households restock or replace items, Fiji’s economy continues its recovery path, it said.

The RBF said given that damage to crops and infrastructure was concentrated mainly in the Western division, the overall flood impact is likely to be contained.

The RBF predicts that from April onwards, households and businesses affected by the floods may draw-down on their savings rather than increase their indebtedness in an effort to re-build houses and get their businesses running.

Nevertheless, it says the relatively higher bank liquidity levels, which totalled $537.4 million in March, have continued to influence deposit rate downwards. It states inflation in March stood at 5.6 per cent, compared to 6.2 per cent in February, underpinned by lower prices of cereals, preserved meat, some beverage drinks and market items.

While the impact of the floods are expected to cause some temporary rise in prices of fruits, vegetables and other crops, these effects are likely to fade away by year-end, keeping the annual inflation rate for 2012 intact at 3.5 per cent.

Gold production was the bright spot, improving by 42.1 per cent cumulative to February this year.

The RBF saidconsumer spending continued to pick-up in the review period as evident from the growth in new consumption lending of 97.7 per cent in quarter one and Value Added Tax collections of 22.3 per cent in the year to January.

Consequent to higher growth in VAT refund of 100.1 per cent in the year to January, the net VAT recorded a marginal increase of 1.5 per cent.

By Ropate Valemei