A massive reservoir of banking liquidity and a low interest rate environment have triggered a surge in Fiji’s construction and real estate sectors, according to the Reserve Bank of Fiji (RBF).
Commercial banking system liquidity stood at approximately $2.1 billion as of August 28 this year, creating highly supportive financial conditions that have helped kept borrowing costs low, with both commercial banks weighted average new and outstanding lending rates settling at 4.50 per cent in July.
The central bank’s August economic review highlighted how local businesses were leveraging the low interest rates.
Partial indicators, according to the central bank, continue to point to positive investment activity.
New investment lending skyrocketed by 38.3 per cent in the year to July, primarily driven by stronger lending to the building and construction sector (67.7 per cent) and real estate sector (34.7 per cent), the central bank stated.
“Over the same period, domestic cement sales also recorded robust growth of 38.2 per cent, amid sustained demand from ongoing development projects,” the RBF stated.
“Consistent with this trend, construction-related imports rose by 20.6 per cent up to May, on the back of increased activity in the construction sector, including the growing use of prefabricated building materials.”
The RBF also noted that these accommodative, low-rate conditions had effectively helped sustain strong private sector credit growth of 14.6 per cent, which in turn contributed to the expansion in broad money across the national economy by 7.8 per cent in July.
