Post on 24-Aug-2018
Presentation to the Presentation to the
Fiji Institute Fiji Institute of of AccountantsAccountants
THE FIJI ECONOMYTHE FIJI ECONOMYTHE FIJI ECONOMYTHE FIJI ECONOMY
22 May, 201222 May, 2012
WORLD ECONOMY WORLD ECONOMY
PERFORMANCE & OUTLOOKPERFORMANCE & OUTLOOK
WORLD ECONOMY WORLD ECONOMY
PERFORMANCE & OUTLOOKPERFORMANCE & OUTLOOKPERFORMANCE & OUTLOOKPERFORMANCE & OUTLOOKPERFORMANCE & OUTLOOKPERFORMANCE & OUTLOOK
5.1
4.0 4.0
5.2
3.83.3
3.9
5.3
3.9 3.54.1
3.0
4.0
5.0
6.0
7.0Forecast @ Sept'11 Forecast @ Jan'12 Forecast @ Apr'12
% Global prospects gradually strengthening but downside risks remain.
WORLD GDP WORLD GDP GROWTHGROWTH
3.83.3
2.8
-0.6
-2.0
-1.0
0.0
1.0
2.0
3.0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011e 2012f 2013f
Source: IMF World Economic Outlook – April 2012
1.83.0
-8
-6
-4
-2
0
2
4
6
2007 2008 2009 2010 2011
P
e
r
c
e
n
t
US
0.8
0.4
-1.0
0.0
1.0
2.0
2007 2008 2009 2010 2011
P
e
r
c
e
n
t
Australia
0.70.3
-2
-1
0
1
2
2007 2008 2009 2010 2011
P
e
r
c
e
n
t
NZ
QUARTERLY GDP GROWTHQUARTERLY GDP GROWTH
2007 2008 2009 2010 2011
0.1
-0.3
-4
-3
-2
-1
0
1
2
2007 2008 2009 2010 2011
P
e
r
c
e
n
t
Euro-zone
0.5
-0.2
-4
-3
-2
-1
0
1
2
2007 2008 2009 2010 2011
P
e
r
c
e
n
t
UK
1.7
-0.2
-5
-3
-1
1
3
2007 2008 2009 2010 2011
P
e
r
c
e
n
t
Japan
Source: Bloomberg
1.7 2.01.4
-0.7
1.42.1
3.02.3 2.0
-0.3
2.4
3.5 3.2
1.70.9
-2.0
0.0
2.0
4.0
6.0
United States Australia New Zealand Japan Eurozone
2011(e) 2012(f) 2013(f)%
TRADING PARTNERS’ OUTLOOKTRADING PARTNERS’ OUTLOOK
9.2
7.2
0.1
5.13.6
5.0 4.9
8.26.9
5.54.4
3.52.6 2.7
8.8
7.37.5
4.7 4.0 4.2 3.9
0
5
10
15
China India Thailand Malaysia Korea Hong Kong Singapore
Source: IMF World Economic Outlook –April 2012
ASIA’S ECONOMIC ASIA’S ECONOMIC OUTLOOKOUTLOOK
TRADING PARTNER OUTLOOKTRADING PARTNER OUTLOOK
2011 REVISED 2012 GROWTH FORECASTS
Trading
PartnerJan April Change
US 1.7 1.8 2.1
Japan -0.7 -0.9 2.0
Euro zone 1.4 1.6 -0.3
Sources: IMF World Economic Outlook –Apr/Jan 2012 and *Asia Pacific Consensus Forecast - Jan 12
Euro zone 1.4 1.6 -0.3
Aust* 2.0 2.0 3.0
NZ* 1.4 1.7 2.3
UK 0.7 0.9 0.8
China 9.2 9.2 8.2
India 7.2 7.4 6.9
World Market Sugar PricesWorld Market Sugar Prices
New YorkNew York
0
5
10
15
20
25
30
35
40
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
WM Sugar Price (US$) EU Sugar Price(US$)
WM - 18/05 US20.47cents/pound
F
u
t
u
r
e
s
US cents/1b
Sources: Bloomberg and Fiji Sugar Corporation
EU - 17/05 US29.69cents/pound
Gold PricesGold Prices
End of MonthEnd of Month
CRUDE (Brent) Oil PricesCRUDE (Brent) Oil Prices
End of MonthEnd of Month
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
US $/oz
F
u
t
u
r
e
s
18/05 US$1589.50/oz
0
20
40
60
80
100
120
140
160
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
US $/barrel18/05– US$107.98/barrel
F
u
t
u
r
e
s
Source: Bloomberg
DOMESTIC GROWTH DOMESTIC GROWTH
PERFORMANCE & OUTLOOKPERFORMANCE & OUTLOOK
DOMESTIC GROWTH DOMESTIC GROWTH
PERFORMANCE & OUTLOOKPERFORMANCE & OUTLOOKPERFORMANCE & OUTLOOKPERFORMANCE & OUTLOOKPERFORMANCE & OUTLOOKPERFORMANCE & OUTLOOK
EVOLUTION OF THE FIJI ECONOMY
1970’s to 1980’s – Post Colonial Era
Major Economic Sectors
• Sugar – backbone of the Fijian
economy
• Tourism
• Rice
• Cocoa
• Dairy
• Construction Industry
Inward Looking Polices
• High protective tariffs and quotas
Major Developments and Policies
Government Support for domestic industries
• Subsidies – copra price support, coconut
replanting subsidy
• Expansion of infrastructure development,
particularly in key investment locations –
Ministry of Finance
particularly in key investment locations –
Sigatoka Valley
Infrastructure development after independence
• Suva – Nadi Highway
• Construction of Airports, wharfs and rural &
outer island roads
• Monasavu Hydro Dam
Preferential prices + quota for sugar exports
(Cotonou Agreement)
EVOLUTION OF THE FIJI ECONOMY
1990’s
Economic Sectors
• Tourism
• Sugar
• Mining
• Mineral Water
• Fish
• Forestry
Fiji’s accession to the WTO – 1996
• As part of the trade liberalization process, Government
removed import restrictions (quota’s, licenses and reduction
in tariffs rates)
• Trade Liberalization and the fall in world commodity prices
affected uncompetitive domestic industries – Rice, Dairy,
Cocoa, etc
• This entice Government’s to focus on transforming Fiji into
an export oriented economy
New industries
Ministry of Finance
an export oriented economy
Major Developments and Policies
• Expansion of tourism industry led to the construction of new
resorts and tourist facilities
• This led to the introduction of the Hotel Aid Act incentives – 20
year tax holiday
• New resource discoveries
• Mineral Water – Provision of 13 year Tax Free Factory status
• Mining – Vatukaula Tax Agreement – 7 year Tax holiday
reviewed and extended over the years, tariff concessions on
imports of specialized equipments
EVOLUTION OF THE FIJI ECONOMY
2000’s
Economic Sectors
• Tourism - Rapid Expansion
• Sugar - Slowdown due to gradual
reduction in preferential prices
and low production
• Fishing
• Mining
• Mineral Water
Major Developments and Policies
• Structural Reforms - Establishment of Land
Bank, Sugar Industry reforms
• Targeted incentives for priority growth sectors
• Tax holidays – 7 years for tourism resort
development, 5 years for commercial agriculture
investments, etc
• Creation of new Tax Free Regions in economically
Ministry of Finance
• Mineral Water
• Forestry
• Manufacturing (Flour, beer,
cigarettes, cement, soap)
• Clothing and Textiles
• Audio Visual & ICT
• SME development
• Creation of new Tax Free Regions in economically
depressed locations – Vanua Levu and outer
islands
• Continuation of Government Funded
Programmes and infrastructure development
• Mining Exploration and development – Namosi,
Nawailevu, etc
• Securing of Niche markets
• Extension of SPARTECA agreement – TCF
industry
New industries
30.829.4
36.135.3
25
35
451989 Base (1997) 1995 Base(2002) 2005 Base (2007) 2005 Base (2012)
Percentage
Primary Industry Services
14.0
0.8 1.3
3.1
13.7
8.1
13.0
2.8
8.7
3.7
12.0
1.1
2.71.4
15.7
8.0
11.6
4.6
9.7
3.8
10.4
0.9
2.6
-0.1
14.2
4.1
12.4
4.4
8.6
6.5
9.4
1.32.7
0.7
14.9
3.9
10.6
6.2
9.2
5.8
-5
5
15
25
Agri Frsty Fish Min & Qry
Manuf Other indus
WRT Hotels Trans Comm Other Serv
Source: Fiji Bureau of Statistics
6
8
10
12
14
Percentage
-8
-6
-4
-2
0
2
4
1970 1973 1976 1979 1982 1985 1988 1991 1994 1997 2000 2003 2006 2009(r) 2012(f)
Sources: Fiji Bureau of Statistics and Macroeconomic Committee
8
10
12
14
Actuals Average 5 Years Average 2000s
Average 1970s Average 1980s Average 1990s
Percentage
Average 2000s = 0.8%
Average 1970s = 5.5%Average 1980s = 1.9%
Average 1990s = 3.0%
Volatile & Low Economic PerformanceVolatile & Low Economic Performance
-0.2
2.12.3
-8
-6
-4
-2
0
2
4
6
1970 1973 1976 1979 1982 1985 1988 1991 1994 1997 2000 2003 2006 2009(r) 2012(f)
Average 2000s = 0.8%
Average 5 Years = 0.1%
Sources: Fiji Bureau of Statistics and Macroeconomic Committee
SECTORAL PERFORMANCE SECTORAL PERFORMANCE SECTORAL PERFORMANCE SECTORAL PERFORMANCE SECTORAL PERFORMANCE SECTORAL PERFORMANCE SECTORAL PERFORMANCE SECTORAL PERFORMANCE
703675
500
600
700
800Forecast as @ Nov 2011
Annual
980
1,050
1,093
800
1,000
1,200
Forecasts as @ Nov 2011
Annual
‘000s
TOURISMTOURISM
$M
Arrivals & Earnings are at record levels
Arrivals Earnings
0
100
200
300
400
500
2003 2005 2007 2009 2011(e)
0
200
400
600
800
2002 2004 2006 2008 2010 2012(f)
Sources: Fiji Bureau of Statistics and Macroeconomic Committee
517
350
400
450
500
550
Annual
Forecast as @ Nov 2011
‘000 tonnes
SUGARSUGAR
302
250
300
350Annual
Forecasts as @ Nov 2011
$million
Production & earnings expected to increase
Production Earnings
132
167
189
0
50
100
150
200
250
300
350
1994 2005 2007 2009 2011
Sources: Fiji Sugar Corporation Limited and Macroeconomic Committee
70
139
166
0
50
100
150
200
1996 2005 2007 2009 2011(p)
30
25
30
35
Cum to Sept
Annual
Forecast as @ Nov 2011
‘000 tonnes $M
209
150152
200
250
Annual
Forecasts as @ Nov 2011
FISHFISHMarginal growth expected in production & earnings
Production Earnings
1313
14
0
5
10
15
20
2003 2005 2007 2009 2011(e)
Source: Fiji Bureau of Statistics
%
150
0
50
100
150
2003 2005 2007 2009 2011 (e)
$M
150
120
160
Forecast as @ Nov
Annual
‘000 ounces
GOLDGOLD
Higher production & earnings forecast
Production Earnings
148 142
181
150
200Annual
Forecasts as @ November 2011
Sources: Vatukoula Gold Mines Limited and Macroeconomic Committee
63
50
0
40
80
1997 2004 2006 2008 2010 2012(f)
0
50
100
150
2002 2004 2006 2008 2010 2012(f)
85 86
100
80
100
120
Annual
Forecasts as @ November 2011602
704
600
700
800
Annual
Forecast as at Nov 2011
000 m3$MProduction Exports
TIMBERTIMBERProduction & earnings expected to increase
37
0
20
40
60
80
2002 2004 2006 2008 2010 2012(f)0
100
200
300
400
500
1995 2003 2005 2007 2009(e) 2011(e)
Source: Fiji Bureau of Statistics and Macroeconomic Committee
322
280
350
Annual
Forecasts as @ Nov 2011
90
140
160
180
200
Annual
Forecast as @ Nov 2011
Cum to Jun
GARMENTGARMENT
$M$M
Positive outlook for production & earnings
Production Earnings
9689 92
0
70
140
210
2000 2003 2005 2007 2009 2011(e)
61
0
20
40
60
80
100
120
2002 2004 2006 2008 2010 2012(f)
Source: Fiji Bureau of Statistics
62
87
105110
80
119 122 124 127
80
100
120
140
Annual Forecasts as @ November 2011$M
MINERAL WATER EXPORTSMINERAL WATER EXPORTS
29
4652
68
0
20
40
60
80
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011(p) 2012(f) 2013(f)
Sources: Fiji Bureau of Statistics and Macroeconomic Policy Committee
213
232
297311
322
256
294 295 290 299 299300
400
Annual Forecasts as @ Nov 2011
$M
PERSONAL REMITTANCESPERSONAL REMITTANCESStable foreign exchange earner
Sources: Fiji Bureau of Statistics and Macroeconomic Committee
188
0
100
200
2002 2004 2006 2008 2010 2012(f)
KEY EXPORT SECTORSKEY EXPORT SECTORSKEY EXPORT SECTORSKEY EXPORT SECTORSKEY EXPORT SECTORSKEY EXPORT SECTORSKEY EXPORT SECTORSKEY EXPORT SECTORS
2007: EXPORT EARNINGS2007: EXPORT EARNINGS
874
500
600
700
800
900
F$MAverage Earnings (2007-2010)
MAJOR FOREIGN EXCHANGE EARNERSMAJOR FOREIGN EXCHANGE EARNERS
258
173 150
105 10455
0
100
200
300
400
500
Tourism Remittances Sugar Fish Clothing & Footwear
Mineral Water
Gold
Sources: Fiji Bureau of Statistics and Macroeconomic Committee
9
12
15Monthly % change Headline Exc. volatile items 2012 Forecast
Percentage
April
6.4
INFLATIONINFLATIONINFLATIONINFLATION
1.9
3.5
-3
0
3
6
2007 2008 2009 2010 2011 2012
6.4
Source: Reserve Bank of Fiji and Fiji Bureau of Statistics – CPI release (April - 12)
MONETARY SECTORMONETARY SECTOR
Recovery in credit growthRecovery in credit growth
MONETARY SECTORMONETARY SECTOR
Recovery in credit growthRecovery in credit growthRecovery in credit growthRecovery in credit growthRecovery in credit growthRecovery in credit growth
15.0
20.0
25.0
2,500
3,000
3,500
4,000
Annual Percentage Change
LCIS - $367m
Commercial Bank - $3,125m
$M
Total PSC- $3,492m
%
-5.0
0.0
5.0
10.0
0
500
1,000
1,500
2,000
Mar-07 Sep-07 Mar-08 Sep-08 Mar-09 Sep-09 Mar-10 Sep-10 Mar-11 Sep-11 Mar-12
6.7%
EXTERNAL POSITIONEXTERNAL POSITIONMaintain stable reserves, lower inflationMaintain stable reserves, lower inflation
EXTERNAL POSITIONEXTERNAL POSITIONMaintain stable reserves, lower inflationMaintain stable reserves, lower inflationMaintain stable reserves, lower inflationMaintain stable reserves, lower inflationMaintain stable reserves, lower inflationMaintain stable reserves, lower inflation
0
10
20
% of GDP
Services & Income Net
Improved trade deficit & service inflows to lower deficit in 2012Improved trade deficit & service inflows to lower deficit in 2012
CURRENT ACCOUNT BALANCECURRENT ACCOUNT BALANCE
-40
-30
-20
-10
0
2005(r) 2007(r) 2009(r) 2011(f)
Current Account DeficitTrade Deficit
Source: Fiji Bureau of Statistics and Macroeconomic Committee
1,091
1,303
1,513 1,489
4.7
5.0
6.0
7.0
1,000
1,200
1,400
1,600
RBF Holdings
Retained Imports Cover
Benchmark months of imports cover
F$M Months of Imports
FOREIGN RESERVESFOREIGN RESERVES
549 515
805
559
4.7
0.0
1.0
2.0
3.0
4.0
0
200
400
600
800
2005 2006 2007 2008 2009 2010 2011 14-May-12
Source: Reserve Bank of Fiji
FISCAL POSITIONFISCAL POSITIONTowards fiscal consolidationTowards fiscal consolidation
FISCAL POSITIONFISCAL POSITIONTowards fiscal consolidationTowards fiscal consolidationTowards fiscal consolidationTowards fiscal consolidationTowards fiscal consolidationTowards fiscal consolidation
34
0.6
-1
0
1
-50
0
50
100
2007 2008 2009 2010 2011 (R) 2012 (B) 2013 (T) 2014 (T)
$M % of GDP
Ministry of Finance
-109
-233
-131
-216
-135-114 -120
-2.0
-4.1
-2.1
-3.5
-1.9-1.5 -1.5
-5
-4
-3
-2
-300
-250
-200
-150
-100
3.53.7 3.8 3.9
53.3%
49.9%50.5%
55.6% 55.6%
51.5%
51.2%50.2% 49.1%
35%
40%
45%
50%
55%
60%
4.0
5.0
6.0
7.0
8.0
$B
International Benchmark
GOVERNMENT DEBT
* With net deficit: 1.9% of GDP in
2012, 1.5% in 2013 and 1.5% in
2014.
* Based on current GDP projections
2.9 2.72.9
3.13.4
3.5
10%
15%
20%
25%
30%
35%
0.0
1.0
2.0
3.0
4.0
2006(A) 2007(A) 2008(A) 2009(A) 2010(P) 2011(B) 2012(B) 2013(T) 2014(T)
Govt Debt Debt as % of GDP
International Benchmark
INVESTMENTINVESTMENT
Need to raise investment levelsNeed to raise investment levels
INVESTMENTINVESTMENT
Need to raise investment levelsNeed to raise investment levelsNeed to raise investment levelsNeed to raise investment levelsNeed to raise investment levelsNeed to raise investment levels
• Investment target of 25.0 percent
of GDP
• Investment Gap of $750 million
needed
• Significant reduction in private
investment to 4.0 percent from 15.0
percent in 1980. 20
25
30
35
$750m
Government Target: 25%
percent in 1980.
• Consequently, Government has had
to increase its capital spending
($500m+)
• Increase in Government investment
to 8.0 percent in 2011 from 5.0
percent in 1980.
• Need to increase private sector
participation in the economy – as
engine of growth.
0
5
10
15
1977 1987 1997 2007(e)
� 2012 Growth outlook is positive, supported by moderate
growth in key markets and reconstruction following the
recent floods
� Real sector performances are mixed
� Consumption spending is positive but business
investment remains subdued
� Credit to the private sector is picking up & ample
liquidity in banking system
� Comfortable projection for foreign reserves & inflation
• Need to address fundamental challenges :
o Raising growth and investment;
o Fast-tracking structural reforms;o Fast-tracking structural reforms;
o Prudent financial management by government;
o Ensuring debt sustainability
(including contingent liabilities);
o Facilitating inclusive development; and
o Safeguarding against economic shocks.
ROLE OFROLE OF
MONETARY POLICYMONETARY POLICY
ROLE OFROLE OF
MONETARY POLICYMONETARY POLICYMONETARY POLICYMONETARY POLICYMONETARY POLICYMONETARY POLICY
The Role of Monetary Policy in the Economy
Provide proactive and sound advice to Government
To foster economic growthTo foster economic growthEnhance our role in the development of the economy
Develop an internationally reputable financial system
Disseminate timely and quality information
Recruit, develop and retain a professional team
Definition:
• When key economic relationships are in balance:
• Internal balance – real output is at or close to its capacity & the inflation rate is low and non-acceleration
• External balance – current account position is sustained by capital flows on terms compatible with the growth prospects of the economy without resort to restrictions on trade and payments
Why is it important?
• A stable macroeconomic policy environment is conducive to growth, i.e. when
• Inflation is low and predictable
• Real interest rates are appropriate
• Fiscal policy is stable and sustainable
• Real exchange rate is competitive & predictable
• BOP situation is perceived as viable
How do we achieve macroeconomic stability?
• Stabilisation policies• Application of policies to address or prevent the
emergence of imbalances in the economy• Expenditure-reducing – fiscal (expenditure restraint, revenue-
raising initiative), monetary (higher interest rates)raising initiative), monetary (higher interest rates)
• Structural policies• Changing aspects of the structure or organisation of the
economy that contribute to long-term imbalances• Improve efficiency of resource allocation, raise potential
output that allow for stabilisation at higher output level• Price adjustment & liberalisation, financial sector
reforms, transparency & good governance
Sources of macro instability?
• Exogenous shocks
• Terms of trade shocks, natural disasters
• Inappropriate policies• Inappropriate policies
WHAT IS MONETARY POLICY?
Definition of Monetary Policy:
• Refers to the policies of the Reserve Bank of Fiji to change the money supply and the interest rate, and thereby affect economic interest rate, and thereby affect economic activity
• Simply, the process of managing money
WHAT ARE THE OBJECTIVES OF MONETARY POLICY?
TO PROMOTE MONETARY STABILITY
• Low Inflation • Low Inflation • Adequate Foreign Reserves
HOW IS MONETARY POLICY FORMULATED?
Policy Coordination Committee
Monetary Policy Committee
Board
ChairChair
Chief Manager Economics, Financial Markets, Financial Institutions, Financial System Development and Compliance, Currency and Corporate Services, Executive Services
Members
Economists, Senior Economists and Managers
Chair
Governor
Members
Executive Management
Chair
Governor
Members
Board Directors
HOW IS MONETARY POLICY IMPLEMENTED?
Tools
• Interest Rate • Interest Rate
•Credit Controls
•Statutory Reserve Ratio
•Directed Lending
•Open Market Operations
•Exchange Rate
Final Objectives (Price stability &
reserves)
Intermediate objectives (monetary
Indicators(monetary aggregates)
Operational Targets(OPR)
Instruments (OMO, SRD)
Indicators
• The OPR is used as the benchmark to signal RBF’s policy intentions – in other words, the RBF sends out a signal to commercial banks of which direction it wants interest rates to move
WHAT IS THE OVERNIGHT POLICY RATE (OPR)?
• Conduct of OMO is geared towards aligning the actual RBF 91 Day rate to the OPR
• If RBF raises OPR - Tightening of Monetary Policy
• If RBF lowers OPR - Easing of Monetary Policy
3.00
3.50
4.00
4.50
5.00
OPR BDD Rate
Repo rate
Effective 17 May 2010%
Operational Targets(OPR)
Instruments (OMO, SRD)
0.00
0.50
1.00
1.50
2.00
2.50
Jun-10 Aug-10 Oct-10 Dec-10 Feb-11 Apr-11 Jun-11 Aug-11 Oct-11 Dec-11 Feb-12 Apr-12
Repo Rate: 1.00%
BDD Rate: 0.00%
OPR: 0.50%
OPEN MARKET OPERATIONSOPEN MARKET OPERATIONS
What are Open Market Operations (OMO):
• Buying and selling of securities by the central bank to change the amount of money circulating in the economy
• Changes in the money supply will then affect movements in short-term interest rates
• Changes in interest rates will then impact on the RBF’s monetary policy objectives
• By selling or redeeming Notes,
the RBF adds or withdraws
funds from the market.
• If Sell RBF Notes Liquidity falls IR
• If Redeem RBF Notes Liquidity rises IR
• Changes in the level of funds affects short-term interest rates, including that paid on RBF Notes.
Jun-10 SRD increased to 8.5%
Jul-10 SRD increased to 10.0%
May-10
Adoption
of new
monetary
policy
framework
Nov-10 OPR reduced to 2.5%
Apr-11 OPR reduced to 1.5%
EVOLUTION OF NEW MONETARY POLICYEVOLUTION OF NEW MONETARY POLICY
Feb-11 OPR reduced to 2.0%
0
2
4
6
8
10
%
Overnight Policy Rate
Statutory Reserve Deposit
Nov-11 OPR reduced to 0.5%
JUL-11 AUG-11 SEP-11 OCT-11 NOV-11 DEC-11 JAN-12 FEB-12 MAR-12 APR-12
OPR 1.50 1.50 1.50 1.50 0.50 0.50 0.50 0.50 0.50 0.50
14-Day T-Bills 1.12 1.08 n.i 1.08 0.50 0.50 0.50 n.i n.i 0.47
28-Day T-Bills 1.16 1.05 1.05 1.05 0.56 0.50 0.73 0.70 n.i 0.67
56-Day T-Bills 1.25 1.14 n.i 1.08 1.05 0.80 0.75 0.75 n.i 0.75
MONEY & CAPITAL MARKET RATESMONEY & CAPITAL MARKET RATES
91-Day T-Bills 1.35 1.15 n.i 1.10 1.00 n.i 0.80 0.80 0.80 n.i
14-Day RBF
Noten.i n.i n.i n.i n.i n.i n.i n.i n.i n.i
- 3 years 2.75 2.65 2.60 n.i n.i n.i n.i n.i n.i n.i
- 5 years n.i n.i n.i n.i n.i n.i n.i n.i n.i 4.00
- 10 years n.i n.i n.i n.i n.i n.i n.i 6.75 6.60 5.00
- 15 years 6.72 6.19 5.80 5.80 5.80 6.59 n.i 7.00 7.00 n.i
8
10
12
OUTSTANDING BANK LENDING AND OUTSTANDING BANK LENDING AND
DEPOSIT RATESDEPOSIT RATES%
Lending rate 7.13%
Time Deposit Rate 2.65%
Savings Deposit Rate 0.85%
0
2
4
6
Apr-06 Oct-06 Apr-07 Oct-07 Apr-08 Oct-08 Apr-09 Oct-09 Apr-10 Oct-10 Apr-11 Oct-11 Apr-12
15.0
20.0
25.0
2,500
3,000
3,500
4,000
Annual Percentage Change
LCIS - $367m
Commercial Bank - $3,125m
$M
PRIVATE SECTOR CREDITPRIVATE SECTOR CREDIT
Total PSC- $3,492m
%
-5.0
0.0
5.0
10.0
0
500
1,000
1,500
2,000
Mar-07 Sep-07 Mar-08 Sep-08 Mar-09 Sep-09 Mar-10 Sep-10 Mar-11 Sep-11 Mar-12
6.6%
THE RBF PUTS MONEY INTO THE RBF PUTS MONEY INTO THE SYSTEM, OR TAKES IT OUT THE SYSTEM, OR TAKES IT OUT BY BUYING OR SELLING RBF NOTES BY BUYING OR SELLING RBF NOTES (OPEN MARKET OPERATIONS)(OPEN MARKET OPERATIONS)
Monetary Transmission MechanismMonetary Transmission Mechanism
SHORTSHORT--TERM TERM INTEREST RATESINTEREST RATES
OTHER OTHER INTEREST RATESINTEREST RATES
ECONOMIC ECONOMIC ACTIVITYACTIVITY
INFLATIONINFLATIONFOREIGN RESERVESFOREIGN RESERVES
� 2012 Growth outlook is positive, supported by moderate
growth in key markets and reconstruction following the
recent floods
� Real sector performances are mixed
� Consumption spending is positive but business
investment remains subdued
� Credit to the private sector is picking up & ample
liquidity in banking system
� Comfortable projection for foreign reserves & inflation
FUTURE CHALLENGESFUTURE CHALLENGESFUTURE CHALLENGESFUTURE CHALLENGESFUTURE CHALLENGESFUTURE CHALLENGESFUTURE CHALLENGESFUTURE CHALLENGES
• Need to address fundamental challenges :
o Raising growth and investment;
o Fast-tracking structural reforms;o Fast-tracking structural reforms;
o Prudent financial management by government;
o Ensuring debt sustainability
(including contingent liabilities);
o Facilitating inclusive development; and
o Safeguarding against economic shocks.
THANK YOUTHANK YOUTHANK YOUTHANK YOUTHANK YOUTHANK YOUTHANK YOUTHANK YOU
Reserve Bank of Fiji