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FIJI: CURRENT ECONOMIC CONDITIONS & OUTLOOK
Ariff AliGovernor, Reserve Bank of Fiji
6 July, 2018
2018 PACIFIC UPDATE
22.7
20.2
57.0
1977 Base
Primary Industry Services
18.822.8
58.4
1995 Base
Primary Industry Services
10.920.5
68.6
2011 Base
Primary Industry Services
Source: Fiji Bureau of Statistics
FIJI ECONOMY How have we transformed since independence?
1.0
-1.4
3.02.7
1.4
4.7
5.6
3.8
0.4
4.2
3.23.4 3.2 3.2
-2.0
0.0
2.0
4.0
6.0
2008Gene
2009Mick
2010Tomas
2011 2012Evan
2013 2014r 2015r 2016pWinston
2017f 2018fJosie &
Keni
2019f 2020f 2021f
% Actual May-18 Forecast
Historical Growth Rate
GDP GROWTHHow have we performed against our historical growth rate?
Sources: FBOS & Macroeconomic Committee
GDP GROWTHMoody’s: How have we performed against our peers?
GDP GROWTHIs our forecast in line with others?
2013 2014 2015 2016 2017f 2018f
MACRO 3.6 4.5 4.2 2.0 4.2 3.2
IMF 3.0 3.8 4.3 3.7 3.8 3.5
ADB 3.9 3.6
MOODY 3.2
ANZ 3.3
FBOS (Actuals) 4.7 5.6 3.8 0.4
IMF’s forecast for 2016 derived from estimates done for 2015 Article IV. There was no visit in 2016. The 2016 projections were done before TC Winston.
IMF and ADB’s forecasts for 2018 were done prior to the natural disasters in April 2018.
CONSUMPTION SPENDINGWhat do the key indicators reveal?
Source: Industry contacts
Net VAT Collections
13.9%
0
200
400
600
800
1,000
2010 2011 2012 2013 2014 2015 2016 2017
F$M
Vehicle Registrations
Commercial Banks’ New Consumption Lending Wholesale & Retail Trade Survey
12.1%
0
200
400
600
800
1,000
1,200
2010 2011 2012 2013 2014 2015 2016 2017
F$M
8.7%
-30.2%
0
6,000
12,000
18,000
2010 2011 2012 2013 2014 2015 2016 2017
No.New Vehicles Secondhand Vehicles
5.2% 2.7%
4.4% 4.0%
0
1000
2000
3000
4000
5000
2010 2011 2012 2013 2014 2015 2016 2017 2018
F$M Annual Jan-Mar
INVESTMENTAre the indicators consistent with our assessment of the economy?
Source: RBF and Industry contacts
11.1% 2.2%
0
50
100
150
200
250
2010 2011 2012 2013 2014 2015 2016 2017
‘000 TONNES
Commercial Banks’ New Investment Lending Government's Actual Capital Expenditure
Value of Work Put in Place Domestic Cement Sales
0
100
200
300
400
500
600
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
F$M Building & Construction Real Estate
558
446
10.1%
0
100
200
300
400
500
600
2010 2011 2012 2013 2014 2015 2016 2017
F$MAnnual
5.2%
12.4%15.2%
1506
1852
0
300
600
900
1200
1500
1800
2100
2010 2011 2012 2013 2014 2015 2016 FY16-17 FY17-18(r)
FY18-19(b)
F$M
Actual Capital Budgeted Capital
BUSINESS SENTIMENTSDo real and financial data validate sentiments?
Source: RBF
Overall Business Confidence (Net %) Commercial Banks’ New Lending
2489
2729
0
500
1,000
1,500
2,000
2,500
3,000
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
F$M
65
75
-80
-60
-40
-20
0
20
40
60
80
100
% (Net)Next 6 months Next 12 months
As at 28 May, 2018 Source: RBF
MONETARY POLICYIs it supportive of economic growth?
59866489
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
F$M Outstanding Loans & Advances
5.65
2.0
4.0
6.0
8.0
10.0
12.0
14.0
%
450
0
100
200
300
400
500
600
700
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
F$M
Outstanding Lending Rate Outstanding Loans & Advance
Banks’ Liquidity
LABOUR MARKET Is GDP growth translating into more jobs?
Source: RBF
0
50
100
150
200
250
2010 2011 2012 2013 2014 2015 2016 2017
F$M
-15,000
-5,000
5,000
15,000
25,000
2010 2011 2012 2013 2014 2015 2016 2017
No. New Compulsory Membership
23 2528 28 29 27 26 27
2319
16
7.3 7.5
6.25.5
4.5
0
1
2
3
4
5
6
7
8
9
10
0
5
10
15
20
25
30
35
2005 2007 2009 (r) 2012(e) 2014(e) 2017
%`000sUnemployed Unemployment Rate
RBF Jobs Ads Survey PAYE Collections
FNPF Compulsory Membership and Withdrawals Unemployment has Declined
0
5,000
10,000
15,000
20,000
25,000
2001* 2003* 2005* 2007* 2009* 2011* 2013* 2015 2017
No.
*Job Ads – Fiji Times only from 2001-2014
Exports Imports
Sources: FBOS & Macroeconomic Committee
BALANCE OF PAYMENTSWhy are tourism and remittances important for Fiji?
Tourism Earnings
0
300
600
900
1,200
1,500
1,800
2012 2013 2014 2015p 2016p 2017f 2018f
F$M Annual8.012.3%
0
100
200
300
400
500
600
2010 2011 2012 2013 2014 2015 2016 2017 2018
F$M Annual Jan-Mar
-1.6%3.4%
3.7%
Personal Remittances
0
500
1000
1500
2000
2500
2010 2011 2012 2013 2014 2015p 2016p 2017r 2018f 2019f
F$MJan-Feb Annual
19.7%
7.5%4.7%
6.0%
0
1,000
2,000
3,000
4,000
5,000
6,000
2010 2011 2012 2013 2014 2015p 2016p 2017p 2018f 2019f
F$MJan- Feb Annual
2.2%10.2%
7.9%
3.7%
Source: National Budget Supplement 2017-2018
GOVERNMENT EXPENDITUREWhere is the rise in expenditure diverted to?
Revenue Expenditure Expenditure Mix
*Revenue for FY2017-18 includes asset sales.
4166.8
0.0
500.0
1000.0
1500.0
2000.0
2500.0
3000.0
3500.0
4000.0
4500.0
F$M
4581.0
0.0
500.0
1000.0
1500.0
2000.0
2500.0
3000.0
3500.0
4000.0
4500.0
5000.0
F$M
60
40
0
10
20
30
40
50
60
70
80
90
100
% Operating Capital
Source: National Budget Supplement 2017-2018
-0.5
-4.9
-6.0
5.0
-0.3
-3.4
-6.2
-5.3-5.8
-3.1 -3.3-2.9
-1.8
0.5
-4.1
-2.2
-1.4-1.1
-0.5
-4.2 -4.1
-2.2
-4.5
-3.5
-2.5
-8.0
-6.0
-4.0
-2.0
0.0
2.0
4.0
6.0
1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 15/16(a) 17/18(b) 19/20(b)
%
Average 12 years -3.1 Average 13 years -2.4
Net Deficit(Percent of Calendar & Fiscal year GDP)
BUDGET DEFICITIs it heading in the right direction?
47.5
-
10
20
30
40
50
60
%
FIJI’S DEBT SUSTAINABILITYHow do we fare against the IMF/WB Benchmarks?
Sources: MOE & RBF * Excluding asset sales
Debt as a percent of GDP Debt as a percent of Revenue
External debt as a percent of Exports of Goods & Services External Debt Servicing as a percent of Exports
15.7 20.7 21.5 24.9 26.7 29.7 27.1 28.4
0
50
100
150
200
%
220.0 197.7 191.9 183.5
173.0 180.3 165.7 161.9
149.7
0
50
100
150
200
250
300
%
1.6 1.8 1.5 1.6 1.7 1.84.1
2.2
0
5
10
15
20
25
%
FIJI’S DEBT SUSTAINABILITY How do we fare against our peers?
Source: Moody's
GOVERNMENT DEBTWhy debt to GDP ratio and not absolute values?
Central Government Debt - 2017
(Debt US$ billions)
Source: 2017-2018 National Budget Supplement and International Monetary Fund
Central Government Debt - 2017
(Percent of GDP)
0
100
200
300
400
500
600
Fiji
Mal
div
es
PN
G
Mau
riti
us
New
Ze
alan
d
Au
stra
lia
235.6
104.4
88.2
68.9
65.9
60.1
46.9
45.6
44.3
40.6
31.7
28.2
0 50 100 150 200 250
Japan
Advanced Economies
UK
India
Maldives
Mauritius
Emerging & Developing Economies
Fiji
China
Australia
Papua New Guinea
New Zealand
Economies
Sources: MOE & RBF
GOVERNMENT DEBT
Why are they going in the opposite direction?
32.7 32.3 32.3
13.8 13.3 12.7
0
20
40
60
2010 2011 2012 2013 2014 2015 2016 2017 May-18
% of GDP Domestic External
46.545.6
3,1963,441
3,655
1,352
1,412
1,437
0
1,000
2,000
3,000
4,000
5,000
2010 2011 2012 2013 2014 2015 2016 2017 May-18
F$M Domestic External
4,548
4,853
45.0
5,092
Sources: RBF and FBOS
INFLATIONWhat’s driving prices?
5.1
-4.0
-2.0
0.0
2.0
4.0
6.0
8.0
10.0
% Monthly % Change
Headline Inflation
HEADLINE INFLATION – MAY CONTRIBUTION TO INFLATION– MAY
*Others include Health, Communication, Furnishings, Hhld., Equip. Routine Hhld. Maintenance, Recreation &
Culture, Clothing & Footwear and Misc.
2…
1.8
0.30.1
0.0
1.0
2.0
3.0
4.0
Alcoholic Beverages,Tobacco & Narcotics
Food & Non-alcoholicBeverages
Transport Others*
% 5.1% Annual GrowthVegetables: +21.0%Yaqona: +39.4%Alcohol: +9.3%Tobacco: +6.6%
FOREIGN RESERVESDo we have buffers?
Retained Imports Cover
515 805 559 1,091 1,303 1,513 1,636 1,778 1,811 1,944 1,921 2,273 2,139
5.7
4.9
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
0
500
1,000
1,500
2,000
2,500
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 28-Jun
MORIF$M
Benchmark MORI
Source: RBF
RISKS
Natural disasters
Surge in crude oil/commodity prices
Global geo-political tensions
US interest rate hikes
Reliance on Australia & NZ Visitors
RISKS They are always out there
• 9 years of consecutive growth has resulted in almost doubling of
Fiji’s GDP and above trend growth is forecast for the next 3 years
• Macroeconomic fundamentals are strong:
• Business confidence is high
• Public debt is sustainable and fiscal policy is supportive of growth
• Financial system is sound and low level of interest rates is supportive of
the private sector investment
• External sector is stable with foreign reserves at comfortable levels
• Core inflation is below 3%, however recent spike is driven by supply
side shocks due to natural disasters
• Risks to growth are driven largely by natural disasters and global
commodity price hikes
• Opportunity to raise future growth to above 5 percent
SUMMARY
Source: Reserve Bank of Fiji
MEDIUM-TERM INVESTMENT OUTLOOK: Does it make sense?
56
65
7373
72 72
6967
61
33
44
35
27 26
2528
2833
39
0
20
40
60
80
100
120
Dec-13 Jun-14 Dec-14 Jun-15 Dec-15 Jun-16 Dec-16 Jun-17 Dec-17
% of Firms
Increase Decrease No Change
79 82 79 78
86 8480
72 73
1
0
2018 21
22
1415 20
2826
0
20
40
60
80
100
120
Dec-13 Jun-14 Dec-14 Jun-15 Dec-15 Jun-16 Dec-16 Jun-17 Dec-17
% of Firms
Increase Decrease No Change
Medium-term Investment Outlook (Plant & Machinery) Medium-term Investment Outlook (Buildings)
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