Fiji’s economy is expected to contract more sharply than -4.3% Hopes for recovery in 2021

The Fiji Reserve Bank has stated that the Fijian economy is expected to contract more sharply than the previously estimated -4.3% in 2020, reflecting the significant decline in tourism activity and its side effects for the rest of the economy.

In its April Economic Review, the RBF says the true magnitude of the downturn in the economy will depend on the duration of the COVID-19 pandemic, how quickly global trade and tourism will resume, and the effectiveness of responses policies.

The RBF says that domestic economic activity is expected to return to some normality since the last quarter of 2020 and an economic recovery is expected in 2021.

The latest key activity indicators confirm the expected drop.

The lackluster production in the primary industry persisted in April, with annual contractions in pine logs by 35.5%, causing a drop in wood chips by -14.0% and sawn wood by 29 , 6% of production in the year until March.

Gold production was also 1.9% lower in the same period due to the deterioration of mineral reserves.

On the positive side, electricity production expanded 2.2% in the year to February.

Investment activity slowed further with the contractions observed in domestic cement sales by 17.0% and loans to the construction sector by 23.4% in the year to March.

Labor market conditions deteriorate due to the effects of COVID-19 – RBF

The Reserve Bank of Fiji says that labor market conditions in the country have further deteriorated due to layoffs and reduced hours in line with disruption of tourism, closings and deteriorating economic activity. .

The RBF says that as of April 29, FNPF received 65,800 requests for assistance from the COVID-19 Retirement Plan as a result of the pandemic.

Consumption indicators are also weak given the relatively modest growth of new consumer credit by 1.9% and remittance inflows by 5.9% in the year to March.

Net VAT collections have decreased by 19.2%.

New vehicle registrations decreased 30.8% and second-hand registrations decreased 58% in the same period.

Domestic credit growth slowed to 4.8% in March, from 8.2% a year ago, driven by the slowdown in lending to the private sector amid declining loans from commercial banks to commercial entities in the private sector and individuals.

As such, commercial bank loan rates stabilized while new term deposit rates declined further.

The RBF also says that excess liquidity in the banking system remained adequate at $ 590 million at the end of March. As of April 29, excess liquidity increased to $ 723.5 million, due to an increase in foreign reserves and a decrease in the currency in circulation that more than offset the increase in legal reserve deposits.

Foreign reserves are $ 2.2 billion

Foreign reserves amount to $ 2.2 billion, enough to cover 6.9 months of retained imports according to the Fiji Reserve Bank.

The Bank also states that it is injecting an additional $ 100 million into its import substitution and export financing facility to help alleviate the financial difficulties imposed on private sector companies by the COVID-19 pandemic.

The RBF also says that internal deflation persisted for the sixth consecutive month as prices fell 2.8% during the year in March.

Lower prices for alcoholic beverages, tobacco and narcotics were observed annually; food and non-alcoholic beverages and the categories of housing, water, electricity, gas and other fuels that more than offset the highest prices recorded in the transport category.