Thursday, July 27, 2017

Fiji maintains rate and accommodative policy stance

     Fiji's central bank kept its Overnight Policy Rate (OPR) at 0.50 percent, unchanged since October 2011, and said a continuation of the accommodative monetary policy stance reflects no "significant impending risks" to the bank's dual mandates of inflation and foreign reserves.
     Fiji's inflation rate fell to 2.0 percent in June from 2.5 percent in May and the Reserve Bank of Fiji (RBF) left its year-end projection at 3.0 percent.
     As part of the government's 2017/18 budget, there will be an increase in duties on alcohol, cigarettes and tobacco that is likely to push up prices in coming months but the central bank said this would largely be offset by lower prices of a few other categories.
     Fiji's foreign reserves rose to a record of $2.307 billion as of July 20 from $2.283 billion in June and are expected to rise further to $2.314 billion on July 28, the equivalent of 5.7 months of imports.
     "Looking ahead, foreign reserves are expected to remain adequate until the end of the year," the central bank's acting governor, Ariff Ali, said in a statement.
      The central bank also confirmed its 3.8 percent forecast for economic growth this year as strong performances by its tourism, electricity,  construction and sugar sectors are compensating for weak outcomes in mining and timber.
       In addition, the expansionary fiscal stance and incentives in the national budget "should augur well for growth in the near and medium terms," Ali added.
       Fiji's economy was hit hard last year by Tropical Cyclone Winston - the worst ever cyclone in the Southern Hemisphere - with growth slowing to 2.0 percent from 3.6 percent in 2015.


"The Reserve Bank of Fiji (RBF) Board met on 27 July 2017 and agreed to keep monetary policy unchanged by maintaining the Overnight Policy Rate at 0.5 percent.
The Acting Governor and Chairman of the Board, Mr Ariff Ali stated that, “the continuation of central bank’s accommodative stance reflects that the dual mandates of the Bank remain intact with no significant impending risks in the medium term.”
While certain policy measures announced in the National Budget, such as the duty increases on alcohol, cigarettes and tobacco and higher disposable incomes would likely push up prices in the coming months, this is expected to be largely offset by lower prices noted in a few major categories over the recent months. Annual inflation fell further to 2.0 percent in June, from 2.5 percent in May and from the high of 5.3 percent in June last year, led by lower food & non-alcoholic drinks and clothing & footwear prices. As a result, the year-end projection remains at 3.0 percent.
Foreign reserves rose in June 2017 to $2,283 million, sufficient to cover 5.7 months of retained imports of goods & non-factor services (MORI). On 20 July, foreign reserves reached another all- time high of $2,307 million and are expected to rise to a new high of $2,314 million (5.7 MORI) on 28 July. Looking ahead, foreign reserves are expected to remain adequate until the end of the year.
On the domestic economy, Mr Ali stated that, “despite the recent weak outcomes in the mining and timber industries, the upbeat performances in sectors such as tourism, electricity and construction, coupled with the turnaround noted in cane and sugar production, confirm the positive 3.8 percent growth outlook for 2017.Various partial indicators for consumption and investment point towards firm aggregate demand in the year to date. In addition, the expansionary fiscal stance and incentives announced in the 2017-18 National Budget should augur well for growth in the near and medium terms.
Internationally, the IMF has kept its global growth projection for 2017 and 2018 at 3.5 percent and 3.6 percent, respectively. Nonetheless, medium term risks to this growth outlook remain on the downside.
The Acting Governor concluded that the RBF will continue to monitor developments and risks to the global and domestic economic outlook and align monetary policy accordingly."


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