SUVA, June 30 (Xinhua) -- Fiji's economy is expected to contract severely this year due to the significant decline in tourism activity and its knock-on effects to the rest of the economy.

A statement from the Reserve Bank of Fiji (RBF), the nation's central bank, said on Tuesday that sectoral performances to date remained weak as electricity, cement, gold and timber production fell up to May.

On the services front, Fiji's tourism activity remained muted as visitor arrivals contracted significantly by 56.2 percent in the year to May due to the halt in international travel and tourism. But the lifting of restrictions by the Fijian government will complement the "Love Our Locals" initiative announced by domestic tourism stakeholders and catalyse broader economic activity.

As the backbone of the Fijian economy, tourism is the most important industry in the country and it is the biggest foreign exchange earner, with 40 percent of the country's GDP depending on tourism which employs around 150,000 people directly and indirectly.

The COVID-19 has serious impact on Fiji's tourism. With travel restrictions imposed to stop the spread of the deadly virus, the industry, which has already laid off about 40,000 people, has been at a standstill for the past months, and more lay-offs are likely before things improve.

Recent partial indicators for consumption and investment point to contracting aggregate demand. Given the weakening domestic economy, overall labor market conditions have worsened as reflected by partial indicators. In addition, the number of jobs advertised contracted by a significant 48.8 percent on an annual basis up to May, indicating depressed recruitment intentions and business activities. Credit aggregates were reflective of the economic contraction in the review period. Domestic credit growth decelerated to 3 percent in May due to reduced lending to private sector business entities and private individuals coupled with lower net credit to the public non-financial corporations and state and local government.

In the same period, commercial banks'outstanding lending and deposit rates both declined over the month. Excess liquidity in the banking system remained ample at 849 million Fijian dollars (about 389.7 million U.S. dollars) at the end of May on account of RBF's investment in government bonds, higher foreign reserves and the reduction in currency in circulation over the month.

As of June 29, excess liquidity stood at 780.5 million Fijian dollars (about 358.2 million U.S. dollars).

Annual inflation in the island nation reduced further to -1.7 percent in May from -1.3 percent noted in April and was significantly lower than the 2.1 percent recorded in May last year. Over the month in May, foreign reserves rose by 32.7 million Fijian dollars (about 15 million U.S. dollars) to 2,249.7 million Fijian dollars (about 1032.6 million U.S. dollars), sufficient to cover 7 months of retained imports.

As of June 30, Fiji's foreign reserves totalled 2,181.4 million Fijian dollars (about 1001.3 million U.S. dollars), sufficient to cover 6.8 months of retained imports. In light of the latest developments and the stable outlook for inflation and foreign reserves, the central bank maintained its accommodative stance and kept the Overnight Policy Rate at 0.25 percent in June. Enditem

Related

Go to Forum >>0 Comment(s)