Friday, May 31, 2013

Fiji holds rate steady, growth still on track to hit forecast

    Fiji's central bank held its benchmark Overnight Policy Rate (OPR) steady at 0.5 percent as domestic economic activity remained mixed and inflation tumbled to its lowest level since May 2009.
    The Reserve Bank of Fiji, which has maintained an accommodative policy stance and unchanged rates since December 2011, said the economy remains on target to reach a projected 2.7 percent growth in 2013. The International Monetary Fund put Fiji's 2012 growth at 2.1 percent.
    Fiji's inflation rate fell to 1.0 percent in April from 3.3 percent in March. Separately, the central bank governor was quoted as saying in local media that inflationary pressures were expected to remain subdued and inflation to settle around 3.0 percent by year-end.
    Consumption continues to trend upward, financed by strong growth in private credit and higher inward remittances, and new bank loans for investment purposes more than doubled to $39.5 million in the year to April, underpinned by loans to the building and construction sector.
    However, gold production and visitor arrivals were weak,  with annual gold production down by 41 percent in the year to March due to the low quality of ore, and in January visitor arrivals fell 7.9 percent due to the impact of Cyclone Evan, the bank said in its latest economic review.
    In Fiji's financial sector broad money (M3) rose by an annual 7.6 percent in April due to growth in domestic credit, and outstanding loans by commercial banks rose by 12.7 percent on higher lending.
    In the year to April, the Fiji dollar rose 21.3 percent against the Japanese yen and the Fiji dollar's nominal effective exchange rate (NEER) rose by a monthly 0.2 percent, implying a slight appreciation against major trading partners. However, the real effective exchange rate (REER) fell by 0.2 percent during the month of April due to lower domestic inflation.
    By May 30, Fiji's foreign exchange reserves stood at $1,603 million, sufficient to cover 4.6 months of imports, up from 4.2 months as of April 26.


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