Following its monthly meeting on 27 October, the Reserve Bank of Fiji (RBF) Board agreed to maintain the Overnight Policy Rate (OPR) at 0.25 percent.
Globally, persistently high prices and tighter financial conditions weighed on economic outcomes in the recent quarter as central banks continue to tighten their monetary stance to combat inflationary pressures. As a result, the International Monetary Fund projects a broad-based and sharper-than-expected slowdown in global economic growth from 6.0 percent in 2021 to 3.2 percent this year and 2.7 percent in 2023.
Contrastingly, the domestic economy continued to benefit from the influx of tourists which has exceeded expectations, reaching 63.3 percent of 2019 levels in the year to September. Sectoral performance reflects this recovery as production increased across most industries such as mineral water, sugar, electricity and sawn timber. Consumption activity continues to rise amidst higher prices, supported by the strong growth in inward remittances and steady recovery in the labour market. Meanwhile, partial indicators of investment also picked up, albeit at a slower pace.
Financial conditions remain accommodative, mirroring real sector outcomes, with liquidity levels (26/10) at $2,592.9 million. Commercial banks’ outstanding deposit and lending rates remained at historical lows in September, supporting the annual 5.5 percent growth in credit to the private sector. New loans disbursed by the banking system in the first nine months of the year totalled $2,563.3 million underpinned by higher lending to the wholesale, retail, hotel & restaurants, transport & storage, private individuals and real estate sectors. Furthermore, the level of non-performing loans reported by commercial banks and licenced credit institutions fell over the month in September.
Against this backdrop, the Board noted that the Fijian economy is on track for a strong rebound of 15.6 percent this year. The latest annual inflation outcomes point to a moderation in prices to 5.1 percent in September from 5.9 percent in the previous month with imported inflation still accounting for most of the price movements. Foreign reserves remain at comfortable levels at around $3.6 billion (27/10), sufficient to cover 8.3 months of retained imports.
Considering the ongoing domestic recovery and inflation outcomes that remain largely supply-side driven, Governor Ali concluded that current monetary conditions needed to remain accommodative. The RBF will continue to monitor global and domestic economic developments and align monetary policy as and when required.
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