Executive Summary
Economic growth since 2001 has averaged 2.6 percent reaching a peak of 5.3 percent in 2004. While the Fiji economy posted the fifth consecutive year of growth in 2005, the rate of growth has slowed. Our projections are for a pick up in economic growth this year, and for modest growth over the next three years.
To safeguard the objectives of monetary policy, the Reserve Bank tightened monetary policy during the first half of the year. As such the policy indicator rate was raised by 1 percentage point in February and again in June this year. In addition, effective 8 May 2006, the Reserve Bank raised the statutory reserve deposit ratio from 5 to 7 percent. As a result, liquidity in the financial system has declined, interest rates have risen noticeably and domestic credit has begun to moderate. Furthermore, the Bank has recently reviewed its lending rates and rediscount facility, which became effective from 16 October 2006.
Notwithstanding the forecast modest pick up in economic activity in 2006, the twin objectives of monetary policy remain intact. At the end of September, inflation was 2.8 percent, while foreign reserves at $817 million, were sufficient to cover 3.4 months of imports of goods.