Press Release No. : 02/2024
Date : 01 February 2024
Press Release No 02 – RBF Maintains An Accommodative Monetary Policy Stance
The Reserve Bank of Fiji (RBF) Board agreed to maintain the Overnight Policy Rate at 0.25 percent during its first meeting of the year on 31 January.
The Governor and Board Chairman, Mr Ariff Ali, stated that the Fijian economy has rebounded strongly over the last two years supported by the impressive recovery in the tourism industry. The 929,740 visitor arrivals last year set a new record, surpassing the 2019 level by 4.0 percent and the previous year by 46.1 percent. The tourism-led boost to the economy improved employment prospects and raised incomes which were also complemented by a new record inflow of remittances ($1.25b). The higher disposable income boosted aggregate demand, particularly, consumption spending.
However, Mr Ali added that spending on investment has been lower than expected while the performance of the primary and natural resource sectors suffered due to industry-specific issues with sugar, forestry, gold and mineral water outputs noting a contraction in 2023.
The Governor added that financial conditions remain supportive of economic growth. Credit to the private sector expanded by 7.6 percent last year while the ample banking system liquidity (31/01: $2.0b) helped keep lending rates around historical lows.
On the RBF’s twin monetary policy objectives, Mr Ali noted that annual headline inflation rate was 5.1 percent in December, reflecting the effect of higher VAT and tariff rates as well as the pass-through of imported food and energy prices. However, inflation is expected to moderate to 3.0 percent by the end of 2024 as the effects of the tax increases subside and the positive impact from retreating global food and energy prices are realised. Foreign reserves were around $3.3 billion as at 31 January, sufficient to cover 5.3 months of retained imports of goods and services, and reserves coverage is expected to remain within comfortable range over the medium term.
The Governor concluded that 2024 is expected to be a challenging year. The Fijian economy is projected to decelerate as the substantial growth in tourism and consumption will taper off. In addition, the continued loss of skilled and semi-skilled workers and their families (around five percent of the population) will adversely affect productivity and translate to lower domestic demand at the same time. The RBF will continue to monitor the latest domestic and global economic developments, and align monetary policy accordingly.
RESERVE BANK OF FIJI
For further details, please contact:-
Communications Office
Telephone: (679) 3223 381 Email: info@rbf.gov.fj
Mr Mervin Singh – Manager Corporate Communications
Telephone: (679) 3223 229 Email: mervin@rbf.gov.fj