Economic recovery

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The Reserve Bank of Fiji building in Suva. Picture: JONACANI LALAKOBAU/FILE

The Reserve Bank of Fiji has revised its earlier projections to forecast the Fijian economy to contract by 19.0 per cent in 2020, slightly lower than the earlier estimate of -21.7 per cent.

RBF governor and Macroeconomic Committee chairman Ariff Ali said the new projection stemmed from higher-than-expected growth in the agriculture sector coupled with lower-than-expected declines in the wholesale and retail trade, manufacturing and construction sectors.

Mr Ali said the expected contraction in 2020 was still the largest on record and pulled back on economic gains made over the past few years.

It was also highlighted that in the external sector, lower foreign demand had affected exports while subdued domestic demand and lower crude oil prices had lowered the import bill, leading to a narrowing of the trade deficit in 2021.

While economic recovery is expected to be influenced by tourist arrivals, the committee noted that the halt in regular tourism activity from March this year had severely curtailed tourism earnings.

Meanwhile as a result of the halt in tourist arrivals the current account deficit (excluding aircraft imports) is expected to deteriorate significantly to -15.7 per cent of GDP this year, from -4.8 per cent of GDP in 2019.

The central bank however noted that over the next few years, the current account deficit was projected to improve gradually as tourism earnings recovered.

Mr Ali however highlighted that foreign reserves had remained above adequate, boosted by external loan drawdowns by Government earlier in the year with foreign reserves (24/11) around $2,192.2 million, sufficient to cover around 7.3 months of retained imports.

He said the short to medium-term outlook for foreign reserves remained comfortable given the additional external loan drawdowns anticipated next year and the anticipated recovery in tourism inflows from 2022 onwards.

Mr Ali said despite the successful local containment of the COVID-19, the economic ramifications continued to affect the Fijian economy as international borders remain closed.

He said the economic recovery for 2021 remained contingent on the recommencement of international travel, although there was substantial uncertainty around the reopening of borders for quarantine-free travel and the appetite for tourism activity.

According to the Macroeconomic Committee given this uncertainty, economic growth for next year is anticipated to range between 1.6 per cent and 8.0 per cent.

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