Executive Summary
Following growth of 3.4 percent in 2006, the Fiji economy is expected to contract by 2.5 percent in 2007. The growth in 2006 was broad based across most sectors of the economy. In contrast, an economic decline is expected this year, largely due to anticipated weak performances across major sectors of the economy, such as building & construction; community, social & personal services; mining & quarrying; wholesale & retail trade and hotels & restaurants and transport & communication.
The trade deficit widened further in 2006, increasing to around $1.9 billion from $1.5 billion in the previous year. The outcome was largely influenced by a 14 percent increase in imports to around $3.1 billion, which more than offset a 0.8 percent increase in exports that totalled $1.2 billion. Latest indicators suggest that the trade deficit will continue to widen in 2007, in spite of some slow down in imports growth, on the back of the expected economic contraction.
The current economic environment has made the Reserve Bank’s conduct of monetary policy to achieve its twin objectives, more challenging. Inflation, while still low, has risen in the first 4 months of 2007. In addition, foreign reserves, although currently at adequate levels, continue to fall, prompting the Bank to tighten credit and exchange controls. At the end of April, inflation was 5.4 percent while the foreign reserves level of $832.6 million was sufficient to cover 3.4 months of imports of goods.