Country Insight Snapshot Fiji May 2016

Transcription

1 Country Insight Snapshot Fiji Written 13

2 OVERVIEW O V E R A L L C O U N T R Y R I S K R A T I N G : D B 4 d Moderate risk: Significant uncertainty over expected returns. Risk-averse customers are advised to protect against potential losses. Rating Outlook: Stable CORE OUTLOOK + As a relatively poor country in a fast-growing region of the world, with good infrastructure and a growing population, Fiji has significant long-term growth potential. + A return to democracy means Fiji can expect to receive much greater inflows of investment, aid and finance. - Fiji is saddled with various structural defects and a difficult business environment that have undermined its productivity. - The number of graduates remains small and many skilled workers emigrate each year. KEY DEVELOPMENT Public debt is excessive and rising, leading to a potential rise in taxation or cuts in spending at some point in the future. CREDIT ENVIRONMENT OUTLOOK Key Development has had a neutral impact on the outlook. SUPPLY ENVIRONMENT OUTLOOK Key Development has had a neutral impact on the outlook. MARKET ENVIRONMENT OUTLOOK Key Development has had a negative impact on the outlook. POLITICAL ENVIRONMENT OUTLOOK Key Development has had a neutral impact on the outlook. 2

3 KEY INDICATORS Rating History and Comparison Source : Dun & Bradstreet Note: 1 = Low Risk, 7 = High Risk Regional Comparisons Source : Haver Analytics/Dun & Bradstreet Tourist Arrivals (Monthly) (y/y rate, Percentage) Source : National Statistical Offices 3

4 Economic Indicators Indicator e 2016f 2017f 2018f 2019f 2020f C/A balance % GDP Debt Service Ratio, % Govt balance, % GDP Inflation, annual avge % Real GDP Growth, % Source : Haver Analytics/Dun & Bradstreet TRADE AND COMMERCIAL ENVIRONMENT The bureaucratic environment can be suffocating and the administration is inefficient. Delays are common when applying for permits and licences, and investors have complained about the shuffling of permits among government departments, inconsistency in applying procedures, a lack of expertise and ponderous decision-making. Getting a construction permit typically takes around six months; and registering a property takes over two months. Inspections of goods on arrival can also be heavy and intrusive. Similarly, inefficiencies in the courts mean that the system is overloaded and the backlog of cases is large. Enforcing a contract typically takes 13 months and resolving insolvency 22 months. TRADE TERMS AND TRANSFER SITUATION Minimum Terms: CLC The minimum form of documentation or trading method that Dun & Bradstreet advises its customers to consider when pursuing export trade with the stated country. Recommended Terms: CiA Dun & Bradstreet's recommended means of payment. The use of recommended terms, which are generally more stringent than minimum terms, is appropriate when a customer's payment performance cannot be easily assessed or when an exporter may wish to limit the risk associated with a transaction made on minimum terms. Usual Terms: days Normal period of credit associated with transactions with companies in the stated country. Local Delays: 1-2 months The time taken beyond agreed terms for a customer to deposit money in their local bank as payment for imports. FX/Bank Delays: 1-2 months The average time between the placement of payment by the importer in the local banking system and the receipt of funds by the exporter. Such delays may be dependent on FX controls, FX availability and the efficiency of the local banking system. 4

5 Exchange Rate Source : International Monetary Fund/Dun & Bradstreet LCU (local currency unit) = Fijian dollar Credit Conditions Source : Export Credit Agencies Insured export credit exposures, USDm 5

6 RISKS AND OPPORTUNITIES Short-Term Economic Outlook Public debt is excessive Fiji s public debt poses a moderate risk to long-term growth. Public debt amounted to an estimated 47.5% of GDP as of Q1 2016, with contingent liabilities accounting for another 30%, a high ratio for an emerging economy, which is subject to a potential creditor boycott. Worse, public expenditure is continuing to rise, especially in the wake of Cyclone Winston, and much of the new borrowing is in FX, exposing the government to the risk of an exchange rate shock. In this context, the credit rating agency Moody s downgraded the outlook on the government s sovereign ratings in May from positive to stable. On the upside, declining interest rates mean the cost of servicing debt is steadily declining and tax receipts are rising, due to robust economic growth and recent efforts to enforce tax compliance. However, on its current trajectory, the risk remains high that at some point in the future, the government will need to cut back on public spending or raise tax in order to stabilise the public finances, with a dampening effect on economic growth. Meanwhile, the credit environment continues to improve. Lending conditions are easing and the supply of credit is expanding rapidly (by 15.3% y/y in March), due to higher lending to both the private and non-financial public sectors. The central bank has taken advantage of low inflation (0.8% in March) and rising FX reserves to maintain the overnight policy rate at a historic low of 0.5%, and has introduced a loans guarantee scheme for SMEs, providing a further boost to the supply of credit. Meanwhile, average interest rates on new loans are moderate, at 5.7% in March, down from 6.7% in February, due to the relaxed monetary policy and intense competition among local banks. As a result, corporate balance sheets are generally in good order, with non-performing loans equating to an estimated 2.5% of total loans, and the risk of non-payment in local currency due to lack of access to finance is now low. However, the accumulation of debt resulting from the credit expansion is generating imbalances, which cannot last indefinitely, and the central bank has warned that the base rate may need to rise to restore equilibrium and prevent the economy from overheating. Long-Term Economic Potential The World Bank lends millions In April, the World Bank agreed to lend the government USD50m to invest in Fiji s road and maritime infrastructure as part of its Transport Infrastructure Investment Project, intended to help the country maintain and expand its existing infrastructure. The World Bank has set aside up to USD75m for further spending on infrastructure and the Asian Development Bank up to USD350m by

7 COUNTRY PROFILE AND STATISTICS Overview The Republic of Fiji, which became fully independent in 1970, is located in the South Pacific between Hawaii and New Zealand. Fiji comprises three principal islands and scores of smaller islands and islets. The tropical, marine climate is tempered by cooler winds in May-October. Given its location in the South Pacific and its relatively large size in comparison to neighbouring island states, Fiji could become a regional leader. However, its economy is ailing as tourism revenues are volatile, while sugar and garment exports are under pressure. The sugar sector is dependent on EU support prices, which are due to be cut over the medium term. The divide between ethnic Fijians and Indians who immigrated in the 19th and 20th centuries has proven a serious political fissure and severely damaged the business environment. The ethnic-indian population has fallen since 1987, when there was a series of coups in the name of ethnic-fijian primacy. This was followed by the coup of 2000 against ethnic-indian premier Mahendra Chaudhry and the 2006 army-led coup. Key Facts Key Fact Detail Head of government Prime Minister Voreqe Frank BAINIMARAMA Capital Suva Timezone GMT Official language English Population (millions) 0.9 GDP (USD billions) 3.9 GDP per capita (USD) 4,328 Life expectancy (years) 70 Literacy (% of adult pop.) 99.9 Surface area (sq km) 18,270 Source : Various sources/dun & Bradstreet Historical Data Metric Real GDP growth (%) Nominal GDP in USDbn Nominal GDP in local currency (bn) GDP per Capita in USD 4,391 4,595 4,724 4,726 4,328 Population (year-end, m) Exchange rate (yr avge, USD-LCU) Current Account in USDbn Current Account (% of GDP) FX reserves (year-end, USDbn) Import Cover (months) Inflation (annual avge, %) Govt Balance (% GDP) Source : Haver Analytics/Dun & Bradstreet 7

8 Forecasts Metric Real GDP growth (%) Nominal GDP in USDbn Nominal GDP in local currency (bn) GDP per Capita in USD 4,342 4,282 4,638 4,836 5,284 Population (year-end, m) Exchange rate (yr avge, USD-LCU) Current Account in USDbn Current Account (% of GDP) FX reserves (year-end, USDbn) Import Cover (months) Inflation (annual avge, %) Govt Balance (% GDP) Source : Haver Analytics/Dun & Bradstreet Comparative Market Indicators Indicator Fiji Australia Indonesia NZ PNG Income per Capita (USD) 4,328 52,215 3,248 37,891 1,916 Country Population (m) Internet users (% of population) Real GDP Growth (% p.a., ) Source : Various sources/dun & Bradstreet 8

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