fiji: macroeconomic history 2006-current reserve bank of fiji pftac workshop, samoa november 2011
TRANSCRIPT
Buoyant domestic demand, drain on foreign reserves, widening trade deficit
• Fairly strong demand conditions (Positive output gap, acceleration in Private Sector Credit Growth, Increase in imports)
• Foreign reserves plummeted. Monetary policy tightened further. Credit ceiling adopted.
2006
• Credit Ceiling (Dec 06 – Sep 09)• Moral Suasion• Capital Controls• Use of Policy Indicator Rate (PIR) [RBF
91-day note] • Open Market Operations [suspended
from Jun 07 – Apr 10]• Statutory Reserve Deposits
Monetary Policy Tools :
Jan-
06
Feb-
06
Mar
-06
Apr-0
6
May
-06
Jun-
06
Jul-0
6
Aug-
06
Sep-
06
Oct-0
6
Nov-0
6
Dec-0
6
Jan-
07
Feb-
07
Mar
-07
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
PRIVATE SECTOR CREDIT GROWTH
PSC annual growthPSC quarterly growthReal PSC growth_annual
%
Jan-
06
Feb-
06
Mar
-06
Apr-0
6
May
-06
Jun-
06
Jul-0
6
Aug-
06
Sep-
06
Oct-0
6
Nov-0
6
Dec-0
6
0.0
20.0
40.0
60.0
80.0
100.0
120.0
140.0
EXCESS LIQUIDITY
Excess Liquidity
F$M
CREDIT GROWTH & LIQUIDITY
IMPORTS & FOREIGN RESERVES
2005 2006 20072,000.0
2,100.0
2,200.0
2,300.0
2,400.0
2,500.0
2,600.0
2,700.0
IMPORTSF$M
Jan-05 May-05 Sep-05 Jan-06 May-06 Sep-06 Jan-070.0
100.0
200.0
300.0
400.0
500.0
600.0
700.0
800.0
FOREIGN RESERVESF$M
FNPF Recall in 2006 : F$300m
Jan-
06
Feb-
06
Mar
-06
Apr-0
6
May
-06
Jun-
06
Jul-0
6
Aug-0
6
Sep-
06
Oct-0
6
Nov-0
6
Dec-0
60.00
2.00
4.00
6.00
8.00
10.00
12.00
NEW LENDING RATE%
Jan-
06
Feb-
06
Mar
-06
Apr-0
6
May
-06
Jun-
06
Jul-0
6
Aug-0
6
Sep-
06
Oct-0
6
Nov-0
6
Dec-0
60.00
2.00
4.00
6.00
8.00
10.00
12.00
14.00NEW TIME DEPOSIT RATE%
MONETARY CONDITIONS
Dec-05 Feb-06 Apr-06 Jun-06 Aug-06 Oct-06 Dec-060.00
2.00
4.00
6.00
8.00
10.00
12.00
14.00
16.00GOVERNMENT BOND YIELDS
3-year 5-year 10-year 15-year
%
Jan-
06
Feb-
06
Mar
-06
Apr-0
6
May
-06
Jun-
06
Jul-0
6
Aug-0
6
Sep-
06
Oct-0
6
Nov-0
6
Dec-0
60.00
2.00
4.00
6.00
8.00
10.00
12.00
14.00T-BILLS RATE
28 - Day91 - Day
%
MONETARY CONDITIONS
MONETARY CONDITIONS
2005 2006 2007
-1200.0
-1000.0
-800.0
-600.0
-400.0
-200.0
0.0
-20.0
-18.0
-16.0
-14.0
-12.0
-10.0
-8.0
-6.0
-4.0
-2.0
0.0
-9.3
-18.1
Current Account Balance As % of GDP
F$M %
MONETARY CONDITIONS
Dec-05 Jan-06 Feb-06 Mar-06 Apr-06 May-06 Jun-06 Jul-06 Aug-06 Sep-06 Oct-06 Nov-06 Dec-06
-6.0
-4.0
-2.0
0.0
2.0
4.0
6.0
8.0
10.0
12.0INFLATION
Inflation_yoy Inflation_qtrly
%
Continuation of credit ceiling• Tighter monetary conditions led to decline in private
sector credit growth• Import demand fell• Tightening of exchange control• Foreign reserves improved• Suspension of OMO and reduction of SRD ratio from
7% to 6%• Improvement in current account balance
2007
Sep-
06
Oct-0
6
Nov-0
6
Dec-0
6
Jan-
07
Feb-
07
Mar
-07
Apr-0
7
May
-07
Jun-
07
Jul-0
7
Aug-0
7
Sep-
07
Oct-0
7
Nov-0
7
Dec-0
70.0
5.0
10.0
15.0
20.0
25.0
30.0PRIVATE SECTOR CREDIT
GROWTH
PSC_annual growth PSC_qtrly
%
Sep-
06
Oct-0
6
Nov-0
6
Dec-0
6
Jan-
07
Feb-
07
Mar
-07
Apr-0
7
May
-07
Jun-
07
Jul-0
7
Aug-0
7
Sep-
07
Oct-0
7
Nov-0
7
Dec-0
70.0
50.0
100.0
150.0
200.0
250.0
300.0
350.0
400.0
EXCESS LIQUIDITY
EXCESS LIQUIDITY
F$M
CREDIT GROWTH & LIQUIDITY
2006 20072,750.0
2,800.0
2,850.0
2,900.0
2,950.0
3,000.0
3,050.0
3,100.0
3,150.0IMPORT PAYMENTSF$M
Dec-0
6
Jan-
07
Feb-
07
Mar
-07
Apr-0
7
May
-07
Jun-
07
Jul-0
7
Aug-0
7
Sep-
07
Oct-0
7
Nov-0
7
Dec-0
70.0
100.0
200.0
300.0
400.0
500.0
600.0
700.0
800.0
900.0FOREIGN RESERVESF$M
MONETARY CONDITIONS
Underpinned largely by machinery, transport & equipment,mineral fuel & manufactured goods
MONETARY CONDITIONS
2005 2006 2007
-1200.0
-1000.0
-800.0
-600.0
-400.0
-200.0
0.0
-20.0
-18.0
-16.0
-14.0
-12.0
-10.0
-8.0
-6.0
-4.0
-2.0
0.0
-9.3
-18.1
-14.2
Current Account Balance As % of GDP
F$M %
Jan-07 Feb-07 Mar-07 Apr-07 May-07 Jun-07 Jul-07 Aug-07 Sep-07 Oct-07 Nov-07 Dec-07
-8.0
-6.0
-4.0
-2.0
0.0
2.0
4.0
6.0
8.0
10.0
12.0 INFLATION
Inflation_yoy Inflation_annualised qtrly
%
MONETARY CONDITIONS
Oil & Commodity price shocks• High prices• Recovery in domestic demand (easy monetary
conditions + exchange rate appreciation)• Deterioration in the current account balance and rapid
drain in foreign reserves
2008
INFLATION
-10
-5
0
5
10
15
20
Fiji: CPI inflation, 2006-11 (Annualized q-o-q change)
Food price shock
Oil price peaks at US$145 in July 2008
Oil crosses US$70 in Apr-06
Devaluation Apr-09
Oil pass US$80 in Sep-10 VAT raised
to 15% in Jan-11
EXTERNAL SUSTAINABILITY
2005 2006 2007 2008 2009 2010
-20
-16
-12
-8
-4
0
-10
-19
-14
-18
-8
-11
Current account balance, 2005-10 (in percent of GDP)
CAB deteriorated further, after some adjustment in 2007…
EXTERNAL SUSTAINABILITY
2005 2006 2007 2008 2009 20100
10
20
30
40
50
60
70
80
22
28
54
70
Fiji: Nominal exports and imports, 2005-10 (in percent of GDP)
DOMESTIC DEMAND
2006
Q1
2006
Q3
2007
Q1
2007
Q3
2008
Q1
2008
Q3
2009
Q1
2009
Q3
2010
Q1
2010
Q3400
600
800
1000
1200
Fiji: Real import of goods, 2006-10 (in mil-lions of fiji dollars)
Despite the rebound in Q2, import volume was relatively flat…
DOMESTIC DEMAND
2006
Q1
2006
Q3
2007
Q1
2007
Q3
2008
Q1
2008
Q3
2009
Q1
2009
Q3
2010
Q1
2010
Q31200
1300
1400
1500
1600
1700
1800
Fiji: Real absorption, 2006-10 (in millions of fiji dollars)
Absorption re-covered in Q2 and Q3, despite record-high food and oil prices in 2008…
DOMESTIC DEMAND
2006
M1
2006
M5
2006
M9
2007
M1
2007
M5
2007
M9
2008
M1
2008
M5
2008
M9
2009
M1
2009
M5
2009
M9
2010
M1
2010
M5
2010
M9
2011
M1
2011
M5
2011
M9-5
0
5
10
15
20
25
30
35
11.5
Fiji: Private sector credit, 2006-10 (y-o-y percent change)
Ceiling on pri-vate sector credit, Dec-06
Post devaluation: weak recovery
Monetary conditions was relatively easy in 2008…
EXTERNAL SUSTAINABILITY
Jan-
06
May
-06
Sep-
06
Jan-
07
May
-07
Sep-
07
Jan-
08
May
-08
Sep-
08
Jan-
09
May
-09
Sep-
09
Jan-
10
May
-10
Sep-
10
Jan-
11
May
-11
Sep-
11 0.4000
0.5000
0.6000
0.7000
0.8000
0.9000
1.0000
1.1000
Fiji: Exchange rate, 2006-11 (end of period)
AUD per one FJD
EXTERNAL SUSTAINABILITY
Jan-
06
May
-06
Sep-
06
Jan-
07
May
-07
Sep-
07
Jan-
08
May
-08
Sep-
08
Jan-
09
May
-09
Sep-
09
Jan-
10
May
-10
Sep-
10
Jan-
11
May
-11
Sep-
11 80.0
90.0
100.0
110.0
120.0
Fiji: Real Effective Exchange Rate, 2006-11 (end of period)
REER appreciates to a new normal, suggesting that on balance there was a competitiveness loss..
EXTERNAL SUSTAINABILITY
Jan-
06
May
-06
Sep-
06
Jan-
07
May
-07
Sep-
07
Jan-
08
May
-08
Sep-
08
Jan-
09
May
-09
Sep-
09
Jan-
10
May
-10
Sep-
10
Jan-
11
May
-11
Sep-
111.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
Foreign reserves, 2006-11 (in months of imports of goods & services)
Rapid drawdown in foreign reserves…
Global financial crisis and the devaluation
• Very weak domestic demand• Tight monetary conditions• High prices
2009
EXTERNAL SUSTAINABILITY
2005 2006 2007 2008 2009 20100
10
20
30
40
50
60
70
80
28
23
70
51
Fiji: Nominal exports and imports, 2005-10 (in percent of GDP)
EXTERNAL SUSTAINABILITY
2006
Q1
2006
Q3
2007
Q1
2007
Q3
2008
Q1
2008
Q3
2009
Q1
2009
Q3
2010
Q1
2010
Q340
50
60
70
80
90
100
Fiji: Real import of goods, 2006-10 (in percent of GDP)
Import vol-ume tanked in 2009…
EXTERNAL SUSTAINABILITY
2005 2006 2007 2008 2009 2010
-20
-16
-12
-8
-4
0
-10
-19
-14
-18
-8
-11
Current account balance, 2005-10 (in percent of GDP)
Substantial improvement in CAB
DOMESTIC DEMAND
2006
Q1
2006
Q3
2007
Q1
2007
Q3
2008
Q1
2008
Q3
2009
Q1
2009
Q3
2010
Q1
2010
Q31200
1300
1400
1500
1600
1700
1800
Fiji: Real absorption, 2006-10 (in millions of fiji dollars)
Demand collapses in the first 3 quarters but recover in the last quarter…
DOMESTIC DEMAND
2006
Q1
2006
Q3
2007
Q1
2007
Q3
2008
Q1
2008
Q3
2009
Q1
2009
Q3
2010
Q1
2010
Q3
2011
Q1
2011
Q3200
220
240
260
280
300
320
340
Tourism Earnings_SA, 2006-11 (in millions of fiji dollars)
Tourism earnings rebound in Q2 2009..
INFLATION
-10
-5
0
5
10
15
20
Fiji: CPI inflation, 2006-11 (Annualized q-o-q change)
Food price shock
Oil price peaks at US$145 in July 2008
Oil crosses US$70 in Apr-06
Devaluation Apr-09
Oil pass US$80 in Sep-10 VAT raised
to 15% in Jan-11
MONETARY CONDITIONS
2006
M1
2006
M5
2006
M9
2007
M1
2007
M5
2007
M9
2008
M1
2008
M5
2008
M9
2009
M1
2009
M5
2009
M9
2010
M1
2010
M5
2010
M9
2011
M1
2011
M5
2011
M9-5
0
5
10
15
20
25
30
35
0.2
Fiji: Private sector credit, 2006-10 (y-o-y percent change)
Ceiling on pri-vate sector credit, Nov-06
Post devaluation: weak recovery
Tight monetary conditions…
EXTERNAL SUSTAINABILITY
Jan-
06
May
-06
Sep-
06
Jan-
07
May
-07
Sep-
07
Jan-
08
May
-08
Sep-
08
Jan-
09
May
-09
Sep-
09
Jan-
10
May
-10
Sep-
10
Jan-
11
May
-11
Sep-
111.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
Foreign reserves, 2006-11 (in months of imports of goods & services)
SDR allocation in Aug&Sep of SDR60 million
Devaluation in Apr-09
Resurgence in oil & food prices + domestic structural changes (Electricity tariff and VAT)
• Stagnant potential output level• Weak demand• High prices
2010 - CURRENT
DOMESTIC PRODUCTION
6.7
6.8
6.8
6.9
6.9
7.0
7.0
7.1
Fiji: Potential Real GDP, 1994-2011
log_Potential RGDP
Potential output stagnant after 2005…
DOMESTIC DEMAND
2006
Q1
2006
Q3
2007
Q1
2007
Q3
2008
Q1
2008
Q3
2009
Q1
2009
Q3
2010
Q1
2010
Q340
50
60
70
80
90
100
Fiji: Real import of goods, 2006-10 (in percent of GDP)
Despite some re-covery in 2010, im-port de-mand re-main weak…
DOMESTIC DEMAND
2006
M1
2006
M5
2006
M9
2007
M1
2007
M5
2007
M9
2008
M1
2008
M5
2008
M9
2009
M1
2009
M5
2009
M9
2010
M1
2010
M5
2010
M9
2011
M1
2011
M5
2011
M9-5
0
5
10
15
20
25
30
35
Fiji: Private sector credit, 2006-10 (y-o-y percent change)
Post devaluation: weak recovery
INFLATION
-10
-5
0
5
10
15
20
Fiji: CPI inflation, 2006-11 (Annualized q-o-q change)
Food price shock
Oil price peaks at US$145 in July 2008
Oil crosses US$70 in Apr-06
Devaluation Apr-09
Oil pass US$80 in Sep-10 VAT raised
to 15% in Jan-11
EXTERNAL SUSTAINABILITY
2005 2006 2007 2008 2009 2010
-20
-16
-12
-8
-4
0
-10
-19
-14
-18
-8
-11
Current account balance, 2005-10 (in percent of GDP)
CA sustainability still a worry..
EXTERNAL SUSTAINABILITY
Jan-
06
May
-06
Sep-
06
Jan-
07
May
-07
Sep-
07
Jan-
08
May
-08
Sep-
08
Jan-
09
May
-09
Sep-
09
Jan-
10
May
-10
Sep-
10
Jan-
11
May
-11
Sep-
111.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
Foreign reserves, 2006-11 (in months of imports of goods & services)
Foreign reserves moves around 4months cover..
DOMESTIC DEMAND
2006
Q1
2006
Q3
2007
Q1
2007
Q3
2008
Q1
2008
Q3
2009
Q1
2009
Q3
2010
Q1
2010
Q3400
600
800
1000
1200
Fiji: Real import of goods, 2006-10 (in mil-lions of fiji dollars)
DOMESTIC DEMAND
1 2 3 4 5 6 7 8 9 101112131415161718192021222324-5
-4
-3
-2
-1
0
1
2
3
43.3
-0.6
Fiji: Output Gap, 2006-11 (in percent of GDP)
HPGAP_N...
DEVALUATION
Jan-
06
May
-06
Sep-
06
Jan-
07
May
-07
Sep-
07
Jan-
08
May
-08
Sep-
08
Jan-
09
May
-09
Sep-
09
Jan-
10
May
-10
Sep-
10
Jan-
11
May
-11
Sep-
11 0.4000
0.5000
0.6000
0.7000
0.8000
0.9000
1.0000
1.1000 Fiji: Exchange rates, 2006-11 (end of
period)
NZD per one FJD
DEVALUATION
Jan-
06
May
-06
Sep-
06
Jan-
07
May
-07
Sep-
07
Jan-
08
May
-08
Sep-
08
Jan-
09
May
-09
Sep-
09
Jan-
10
May
-10
Sep-
10
Jan-
11
May
-11
Sep-
11 80
90
100
110
120
Fiji: Real Effective Exchange Rate, 2006-11 (end of period)
Immediate depreciation in the REER, representing a competitiveness boost..
DOMESTIC DEMAND
1 2 3 4 5 6 7 8 9 101112131415161718192021222324-5
-4
-3
-2
-1
0
1
2
3
4
Fiji: Output Gap, 2006-11 (in percent of GDP)
HPGAP...
Swift adjustment in the output gap after Q2 2009..
INFLATION
2006
Q1
2006
Q3
2007
Q1
2007
Q3
2008
Q1
2008
Q3
2009
Q1
2009
Q3
2010
Q1
2010
Q3
2011
Q1
2011
Q30.0
2.0
4.0
6.0
8.0
10.0
12.0
9.4
10.3
Fiji: CPI inflation, 2006-11 (y-o-y percent change)
Oil pass US$80 in Sep-10
VAT raised to 15% in Jan-11
Inflation peaks in Q1 before slowing until Sep, where pressures on inflation resumes…