Venkat Raman
Investor confidence is high in Fiji, encouraged by a stable government that followed a successful and trouble-free democratic election held on September 17, 2014.
Economists and political observers said that Fiji can look forward to higher levels of growth in the coming years.
There are also indications that Australia and New Zealand would get closer to the South Pacific country, which they had shunned for almost eight years after Josaia Voreqe (Frank) Bainimarama staged a military coup on December 6, 2006 and took charge of an interim government.
But his return as the elected leader of his Fiji Party and as the Prime Minister in a general election that has been declared ‘free and fair,’ has softened political attitudes in Wellington and Canberra and 2015 may well see ministerial visits among the three countries.
Growing optimism
There is optimism in Fiji and the year-end report by Reserve Bank of Fiji (RBF) will augur well with the ambitions of governments and investors for a more constructive engagement in a number of sectors.
The Report, released on December 31, 2014, said that economic growth would have reached 4.2% as per forecast.
At the end of the 2014 crushing season, cane (13.7%) and sugar (25.8%) production were significantly higher over the year with improved tonnes of cane to tonnes of sugar (TCTS) ratio of 8.1.2. In the timber industry, while woodchip production grew by 28.1% cumulative to November, mahogany production declined by 14.1% in the year-to- October, largely due to wet weather conditions. Gold production also fell by 9.4% cumulative to November,” it said.
Visitor arrivals grew by 4.9% cumulative to November, underpinned by increasing numbers from Australia (2.5%) and New Zealand (13.6%), two major attractions for Fiji.
Surging demand
According to RBF, aggregate demand conditions remained upbeat, with imports of consumption goods and new lending for consumption rising strongly over the year by 20.4% and 61.2% cumulative to October and November respectively.
Investment and construction indicators were robust, the Report said.
New investment lending grew by 9.5% cumulative to November, while imports of investment-related machinery and equipment increased by 24.5% in the year to October.
“Up to the September quarter, the number and value of completion certificates issued rose by 7.3% and 147.3% respectively. In the same period, the number of building permits issued, a forward indicator of construction activity, also increased by 5.9%, while the value of building permits issued dipped slightly by 0.9%,” the Report said.
Credit moves
In the banking sector, broad money rose by an annual 10.3% in November, because of growth in net domestic credit (18.5%), driven by higher private sector credit (16.0%).
The outstanding loans of commercial banks registered 26.6% growth.
The weighted average new lending rate of RBF fell over the month from 6.03% to 5.90% in November, while the outstanding lending rate rose marginally from its historical low level of 5.67% in October to 5.69% in November.
Robust banking
Liquidity in the banking system rose over the month by 13.1% to $571.1 million in November, underpinned by an increase in foreign reserves.
The Fijian dollar weakened against the New Zealand dollar (-1.7%), the US dollar (-1.3%) and the Euro (-0.2%), but strengthened against the Japanese Yen (6.4%) and the Australian Dollar (2.0%) over the month to November.
Exchanging Rates
On an annual basis, the Fiji Dollar appreciated against the Japanese Yen (11.2%), the Euro (5.3%) and the Australian dollar (2.8%) but depreciated against the US (-3.5%) and New Zealand Dollars (-0.4%).
The Nominal Effective Exchange Rate Index fell marginally over the month to November by 0.02% indicating a slight depreciation of the Fiji Dollar against major trading partner currencies. However, over the year, the Index rose by 1.1%.
The Real Effective Exchange Rate Index fell by 0.8% over the month, reflecting a marginal gain in Fiji’s international competitiveness.
RBF attributed this to lower domestic inflation rate compared to the weighted average inflation rate of major trading partner countries.
“Similarly over the year, the Real Effective Exchange Rate Index fell by 0.9%,” it said.
Trade Deficits
The merchandise trade deficit (excluding aircraft) widened by 25.4% to F$2513.8 million cumulative to October. Total exports (excluding aircraft) rose by 13.7% mainly due to higher growth in re-exports and domestic exports.
The increase in re-exports (21.6%) was underpinned by petroleum receipts (11.8%), while the higher domestic exports (3.0%) was led by sugar, mineral water, coconut oil, yaqona, textiles, molasses, folding cartons and other domestic exports.
Total imports (excluding aircraft) rose by 20.2%, led by higher imports of investment goods (24.5%), followed by consumption (20.4%) and intermediate goods (15.4%).
Low Inflation
Inflationary pressures remained low, largely reflective of the soft trading partners’ inflation outlook and the persistent weakness in international oil and food prices.
The country’s annual inflation was -0.2% in November from 0.3% in October, owing to decline in prices of some education and transport items.
As at the end of December 31, 2014, the country’s foreign reserves were about $1811.3 million, sufficient to cover 4.7 months of retained imports of goods and non-factor services.
