Press Release No. : 05/2023
Date : 30 March 2023
At its monthly meeting on 30 March, the Reserve Bank of Fiji (RBF) Board decided to maintain the Overnight Policy Rate at 0.25 percent.
While communicating the decision, the Governor and Chairman of the Board, Mr. Ariff Ali, stated that “latest indicators suggest global economic activity picked up in February driven by the Asian economies and robust demand for services. Nonetheless, the impact of global monetary policy tightening is expected to slow world growth in the coming months as the lagged effect of aggressive rate hikes from last year and a continued restrictive stance by central banks this year will dampen demand.”
Domestically, Fiji’s economic recovery to pre-pandemic levels continues to be facilitated by momentum in tourism. Mr. Ali highlighted that “tourist arrivals (114,736) cumulative to February were 1.9 percent above pre-pandemic numbers, primarily due to higher arrivals from Australia. The resumption of flights to Hong Kong and Japan in the coming months, the establishment of new routes and plans by Fiji Airways to increase fleet numbers brighten the outlook for this sector. In addition, sectoral performances were positive in the review period, with the exception of woodchip and gold production. Due to increased economic activity and migration trends, labour market conditions remain tight, resulting in higher employment and incomes. As such, consumption levels have grown strongly, also supported by higher remittances. On the other hand, the pace of investment has been relatively moderate but is expected to improve in the medium term with fiscal policy certainty and as price pressures wane.”
Mr Ali added that financial conditions remain accommodative, with system liquidity high at $2,386.5 million (29/03). Private sector credit grew over the year in February (6.3%), consistent with historically low lending rates and better economic conditions. The level of non-performing loans for commercial banks dropped further over the month from improved debt serviceability, while the banking system remained adequately capitalised.
With regard to the recent collapse of banks in the United States and the Swiss-government brokered rescue of Credit Suisse by UBS, and its contagion impact on broader financial markets and spillover to Fiji, the Governor highlighted that there is no direct threat to Fiji’s financial stability given the context of the collapse and that our institutions have no exposure to those banks.
On the RBF’s monetary policy objectives, Mr. Ali mentioned that “the headline annual inflation rate moderated to 1.5 percent in February, lower than the outcome last year (1.9%) and with two-thirds (1.0 percentage point) imported. Furthermore, foreign reserves are at $3,314.3 million (30/03), sufficient to cover 6.1 months of retained imports, and is projected to be adequate in the near to medium term.”
Against this backdrop and given the comfortable outlook of the twin monetary policy objectives amid an economy still in recovery, the Board decided to maintain the accommodative monetary policy stance. Considering the balance of risks, further global and domestic developments will be monitored and assessed closely and monetary policy will be aligned accordingly.
RESERVE BANK OF FIJI
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