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Fiji growth rate downgraded

Fiji's growth has been downgraded to 2.0 per cent compared with the 2.4 per cent projected earlier in the year.

Chairman of the Macroeconomic Committee and Reserve Bank of Fiji governor Barry Whiteside said: “The lower growth reflected the larger-than-expected negative impact from the natural disasters (including Severe Tropical Cyclone (TC) Winston) earlier in the year.

“The projected declines in output from the agriculture and forestry sectors are higher than earlier estimated while fishing and aquaculture activity is now forecast to fall this year,” said Whiteside.

The central bank says the slowdown in the agricultural sector was underpinned by a larger decline expected for cane output while lower activity in fishing and aquaculture reflects the significant damage to the inshore marine ecosystem and infrastructure sustained during Severe TC Winston.

It said following strong growth of 5.6 per cent in 2014 and 3.6 per cent growth in 2015, the Fijian economy was forecast to record its seventh consecutive year of growth this year.

Whiteside said while the accommodation and food services and the construction sectors remained strong, their contributions to growth had been downgraded on the back of below-trend growth in visitor arrivals so far and slower implementation of rehabilitation works because of supply shortages in building materials.

“The current expansionary fiscal policy as a result of increased Government allocation in the 2016/2017 National Budget is appropriate and supportive of growth.”

According to the RBF industries such as manufacturing, transport and storage, financial and insurance activities, accommodation and food services and the wholesale and retail trade sectors are being described as the major contributors to the 3.0 per cent growth forecast for 2018 and 2019.

Whiteside said next year, the Fijian economy was expected to achieve a broad based growth of 3.6 per cent, unchanged from the earlier projection.

He said overall, growth in 2016 would be driven mainly by the services and industrial (excluding sugar manufacturing) sectors whose positive contributions outweigh the notable decline in agriculture.

“The near term outlook for inflation and foreign reserves continue to remain stable as the negative impacts of the natural disasters are expected to wane.

“There has been an uptick in inflation which reflects the temporary supply shortages, particularly for yaqona, following the natural disasters.

“Inflation fell to 4.7 per cent in October and is expected to be close to these levels by the end of the year.

“Foreign reserves were $1,943.5 million as at 15 November 2016, equivalent to 5.4 months of retained imports of goods and non-factor services and are expected to remain stable over the remainder of the year.”

He said the Macroeconomic Committee will continue to monitor developments in the global and domestic economy, and revisit its current macroeconomic projections in April 2017.

According to Whiteside, on the external sector, “the trade deficit is estimated to widen this year mainly due to higher imports of machinery and transport equipment, manufactured goods, food and chemicals, to support the reconstruction of housing and infrastructural amenities post TC Winston”.

He said agro-based exports such as sugar, fruit and vegetables and timber were anticipated to decline (given the damage sustained by many farms).

“Consequently, the current account deficit (excluding aircraft) is projected to widen to 3.3 per cent of Gross Domestic Product in 2016 reflecting the deterioration in the trade balance as well as slower growth in tourism earnings and inward remittances,” he said.

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