Opening of borders and resumption of travel should augur well for the economy in the last quarter of 2021 – RBF Governor

The Governor and Chairman of the Reserve Bank of Fiji Board, Ariff Ali says the recent opening of borders within Viti Levu and the planned resumption of international travel later this year should augur well for the Fijian economy in the last quarter of 2021.

Following the RBF Board meeting, Ali says latest sectoral data reveal better annual performances for the resource-based sectors, particularly timber, gold, and mineral water production, while COVID-19 related disruptions continue to impact both the services and industrial sectors.

He says while partial indicators for consumption and investment remained generally weak over the month, some improvements are envisaged moving ahead as COVID-19 induced restrictions are relaxed and businesses reopen.

Ali says financial conditions remain accommodative, with liquidity levels at $1.629 billion.

The Governor says the comfortable level of foreign reserves coupled with the quantitative easing measures of the RBF including through the Disaster Rehabilitation and Containment Facility, will ensure that liquidity remains ample and supportive of a low-interest rate environment in the near term.

Ali also says commercial banks’ lending rates and cost of funds have broadly declined since the beginning of the year.

However inflation turned positive in August, mainly underpinned by higher prices for food and fuel. Food prices rose by 6.9 percent, while the upswing in global energy prices underlined the 36.5 percent average growth in domestic fuel prices compared to the same period last year.

The RBF says consequently, year-end inflation is forecast to increase to 2 percent after hovering in the negative territory for most of the last twenty months.

Foreign reserves remain at comfortable levels at around $3.183 billion, sufficient to cover 11 months of retained imports.

Meanwhile the RBF Board has maintained the Overnight Policy Rate at 0.25 percent following its monthly meeting today.

Ali explained that the global economic recovery continues, albeit at an uneven pace.

He says several central banks, especially in advanced economies, have indicated their intentions to taper their quantitative easing program due to inflationary concerns.

Ali says supply chain disruptions, rising shipping costs coupled with higher global energy and food prices have stoked inflationary concerns, prompting a reassessment of their accommodative stance.

The Governor also says in emerging and developing countries, a sustained recovery continues to be elusive, reflecting slow progress in vaccination, tightening financial conditions and pandemic-related disruptions to economic activity.