Fiji maintains rate and accommodative policy stance

May 31, 2018

By CentralBankNews.info
      Fiji’s central bank kept its benchmark Overnight Policy Rate (OPR) at 0.50 percent and said its monetary policy stance would remain accommodative in light of the stable outlook for its twin objectives of inflation and foreign reserves.
      The Reserve Bank of Fiji (RBF), which has maintained its rate since October 2011, noted inflation rose to 4.0 percent in April, the highest in 12 months, from 2.6 percent in March but this was mainly due to supply-side shocks in the aftermath of natural disasters last month and relatively higher prices for kava and vegetables.
      This impact is expected to subside in coming months as the supply of most agricultural items normalizes, RBF said.
      On May 11 the central bank forecast upward pressure on prices in coming months but inflation would then stabilize around 3.0 percent by year-end and then average around 2.5 percent in 2019 and 2020.
       Fiji was hit by Tropical Cyclone Winston in February 2016, the worst ever cyclone in the Southern Hemisphere, and then by Cyclones Josie and Keni in April this year, which caused severe flooding and killed four people.
      But RBF Governor Ariff Ali said consumption remains upbeat and the economy is expected to register its ninth consecutive year of growth in 2018. Economic growth in 2017 has been estimated at 4.2 percent.
      Earlier this month the central bank lowered its 2018 growth forecast to 3.2 percent from 3.6 percent due to the devastating impact on agriculture from the cyclones in early April.
      But for 2019 the growth outlook was revised upwards to 3.4 percent from 3.2 percent while the 2020 outlook was unchanged at 3.2 percent.
      There has been a robust recovery in gold and timber production along with positive results in tourism and electricity production, while the global economic upswing continues to strengthen, underpinned by the recovery in emerging market economies, higher trade and investment.
      “However, geopolitical tensions between the United States and Iran and the general increase in commodity prices could pose risks” to the outlook, Ali added.
      Fiji’s foreign reserves rose to US2.163 billion as of May 31, up from $2.157 billion on March 29, sufficient to cover five months of imports and services, and are expected to remain at comfortable levels by year-end.
      In 2017 Fiji’s foreign reserves rose by $351.6 million to $2.272.8 billion end-year.

     

      The Reserve Bank of Fiji issued the following statement:

“The Reserve Bank of Fiji Board has agreed to keep the Overnight Policy Rate unchanged at 0.5 percent following its monthly meeting on 31 May.
Announcing the decision, the Governor and Chairman of the Board, Mr Ariff Ali, stated that“sectoral performances in the year have been generally positive so far, attributed to robust recovery in gold and timber production coupled with positive outcomes noted for visitor arrivals andelectricity generation.”
Governor Ali highlighted that “consumption activity remains upbeat as reflected in increased VAT collections, higher vehicle registrations, and rising commercial banks’lending.” He added that despite the natural disasters in early April, the economy is expected to register its ninth consecutive year of economic growth in 2018.
On the international front, Governor Ali stated that the global economic upswing continues to strengthen underpinned by the recoveries in emerging market economies and the increase in global trade and investment activities. However, geopolitical tensions between the United States and Iran and the general increase in commodity prices could pose risks to our macroeconomic outlook going forward.
Nevertheless, the outlook for the Reserve Bank’s twin monetary policy objectives remains intact.Annual inflation increased to 4.0 percent in April from 2.6 percent in March, attributed to supply- side shocks post-natural disasters and relatively higher prices for yaqona (kava) and vegetables. However, this is anticipated to subside in the months ahead as supply of most agricultural market items normalise. Foreign reserves were adequate at $2,163.3 million as at 31 May, sufficient to cover 5.0 months of retained imports of goods and non-factor services and are expected to remain at comfortable levels by year-end.
Governor Ali concluded that in light of the latest global and domestic economic developments and the stable outlook for inflation and foreign reserves, the monetary policy stance would remain accommodative. The Reserve Bank will continue to monitor economic developments closely and will align monetary policy as and when appropriate.”

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