Monetary Policy Assessment and Key Issues
Overview
Global economic conditions were dominated by the unravelling of the financial crisis, as the major industrialised countries entered into recession and growth of emerging economies slowed. The International Monetary Fund (IMF) projects that the world economy will be in recession in 2009, with growth at 2.2 percent, compared to the estimate of 3.7 percent for this year. Except for Australia, our major trading partners are in recession. These developments are anticipated to adversely affect Fiji’s growth, trade and balance of payments (BOP) outcomes in the New Year.
Fiji’s economy is anticipated to expand by 1.2 percent this year and grow further by 2.4 percent in 2009. Consumption and investment remain subdued although Government’s fiscal expansionary position should drive economic activity next year. The trade deficit, however, continues to deteriorate.
Inflation has eased from a 20-year high of 9.8 percent in September to 7.7 percent in November. This is in line with the remarkable fall in international oil prices in recent months. Lower prevailing crude oil prices are also expected to mitigate recent announcements in terms of the higher Fiji Electricity Authority’s (FEA) fuel surcharge and duty changes listed in the 2009 National Budget. As such, the inflation forecast remains unchanged at 7.5 percent. Inflation is projected to moderate to 4.5 percent in 2009.