Thursday, January 28, 2016

Fiji holds rate, 2016 growth seen at 3.5%, inflation low

    Fiji's central bank held its Overnight Policy Rate (OPR) steady at 0.50 percent, citing firm growth prospects, low inflation and comfortable foreign reserves.
    The Reserve Bank of Fiji, which has maintained it rate since October 2011, forecast economic growth this year of 3.5 percent, below the 4.0 percent estimated for 2015, as demand should hold up supported by favorable financing, positive consumer and business sentiments, and fiscal stimulus.
    A rise in downside risks to the global economic outlook is expected to create negative spillovers for Fiji's trading partners, and thus impact its exports, but a further decline in commodity prices is beneficial to countries such as Fiji that import commodities.
    Fiji's inflation rate eased to 1.6 percent in December from 1.8 percent in November and is forecast to remain low this year, the central bank said.
   Foreign reserves were around $1.998.3 billion as of Jan. 28, enough for 5.6 months of imports.

    The Reserve Bank of Fiji issued the following statement:

"At its monthly meeting on 28 January, the Reserve Bank of Fiji Board agreed to maintain the Overnight Policy Rate at 0.5 percent.
In announcing the decision, the Governor and Chairman of the Board, Mr Barry Whiteside stated that, following an estimated 4.0 percent expansion last year, the domestic economy is poised to achieve its seventh consecutive year of economic growth in 2016, of 3.5 percent. Growth is expected to be broad based with most sectors contributing to overall output. Aggregate demand is expected to hold up this year supported by favourable financial conditions, positive consumer and business sentiments and fiscal stimulus through the 2016 National Budget which should further spur growth.” Comparatively, sectoral performances in 2015 were broadly positive with the exception of the sugar, timber and fish industries, which declined. However, better-than-expected outcomes were recorded for tourism and inward remittances.
On the external front, Mr Whiteside highlighted that the International Monetary Fund further downgraded its global growth projection for 2016 to 3.4 percent largely due to heightened uncertainty and turbulence in emerging market economies and lower growth prospects in the United States and other advanced economies. The elevated downside risks to the global outlook are expected to create negative spill overs for Fiji’s trading partners thereby impacting our tradable sector. However, further declines in commodity prices provide an upside risk for commodity importing countries including Fiji.
Governor Whiteside noted that despite the increasing uncertainties on the international front, domestic growth prospects remain firm and the outlook for the Bank’s monetary policy objectives is intact. Inflation fell to 1.6 percent in December and is forecast to remain low this year. Foreign reserves remain comfortable, currently (28 January) at around $1,998.3 million, sufficient to cover 5.6 months of retained imports of goods and non-factor services.
The Governor concluded that the Reserve Bank will continue to closely monitor the developments on the outlook for inflation and foreign reserves and align monetary policy accordingly. "


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