FIJIAN ECONOMY RISKS AND CHALLENGES. FIA Workshop, June 2017 Esala Masitabua

Transcription

1 FIJIAN ECONOMY RISKS AND CHALLENGES FIA Workshop, June 217 Esala Masitabua

2

3 BIG PICTURE RISKS CHALLENGES CONCLUDING REMARKS

4

5 unprecedented period of growth % Actual Forecast Oct 16 Forecast Growth despite recent natural disasters Economy showing resilience Looking into the next few years expect continuation of growth Gene 29 Mick 21 Tomas Evan r 215p 216f Winston 217f 218f 219f

6 Percent Percent Recovery in 217 broad based growth across sectors.8 Accommodation & Food Services Wholesale & Retail 12% 7% 14% Financial, Insurance & Real Estate : 2.% Agri, Forestry, Fishing & Mining 1% 12% Tourism 29% 2% Social Infrastructure T&SWRTPub Fin Con Acc Info Pro Edu MQAdm Ele RE Oth Hlt FishFrstyMan Agr Manufacturing 25% : 3.8% General Services After TC Winston impact all sectors expecting to grow in 217/ Man Fin ConWRTT&S Agr Acc Info Pub Edu Ele Prof Adm RE Oth Hlth MQ Frst Fish

7 How we are we faring comparatively? % Fiji Papua New Guinea Samoa Solomon Islands Vanuatu Barbados Mauritius We do fare well when compared with Pacific neighbors and countries of comparable size physically and economically e 217f 218f

8

9 RISKS TO THE ECONOMIC OUTLOOK Faster than expected interest rate hikes 1 5 Adverse weather conditions/climate change Decline in global/trading partner demand 2 6 Slower pace of implementation Sharp commodity price movements 3 Three main risks to forecast global, natural disasters and implementation rate. Geopolitical crises 4 Upside if better than expected outcomes

10 Robust period of sustained economic growth does bring about challenges Growth means pressure on Balance of Payments, imports may continue to outstrip exports and widen Infrastructure from growing economic activity, traffic congestion, pollution, housing, resources (capacity shortages) and equality or distribution of growth

11 ENHANCING RESILIENCE SUSTAINING THE GROWTH MOMEMTUM Debt Sustainability Preserving monetary and financial stability Sectoral diversification Inclusive growth STRUCTURAL REFORMS Investment environment Investment education, health, infrastructure Resources Productivity & efficiency To sustain the momentum key is to continue to prioritize measures to enhance resilience and make necessary structural adjustments An economy that is resilient can adjust to shocks. One key way is building buffers fiscally, and creating policy space in preserving monetary and financial stability Reforms are about improving investment climate, productivity and efficiency

12 DEBT SUSTAINABILITY FISCAL CONSOLIDATION

13 % of GDP Domestic External Total Public Debt Debt sustainability is key 14/15 15/16 Apr-17 16/17(b) 17/18(t) 18/19(t) Debt is vital for developing economies Enables vital development to increase capacity into the future hydro dam, roads, hospitals Key is maintaining sustainability Our debt path is sustainable. Also recently confirmed/alluded to in commentaries by WB, ADB and IMF Sources: Ministry of Economy, National Budget Supplement

14 % of GDP Underlying Deficit (Excluding Asset Sales) Net Deficit /15 15/16 16/17 17/18 (t) 18/19 (t) Consolidating fiscally is important 216/217 outcome expected to be lower than budgeted Await updates at National Budget announcement later in the week Sources: Ministry of Economy, National Budget Supplement

15 PRESERVING MONETARY AND FINANCIAL STABILITY

16 Need to build buffers Keep in check F$M MORI % 1. 2,5 2, 1,5 1, Benchmark MORI , ,33 Retained Imports Cover 1, , , ,636 1,513 2,255 1, /2/217 Source: Reserve Bank of Fiji

17 Financial stability as credit cycle eases F$M Housing Personal Transport Others Annual % Change 17.9 % % Housing Personal Transport Others As the recent credit upswing eases financial stability requires increased vigilance RBF prioritizing Credit Bureau as an industry concern Source: Reserve Bank of Fiji

18

19 Openness diversification $M 2, 1,5 1, As an open economy we need to diversify our economic base especially in terms of exports and earning forex to pay for imports There is definite potential in many sectors Sources: RBF, FBOS, Macroeconomic Committee

20 $M 8,. 7,. 6,. 5,. 4,. 3,. 2,. 1, ,828.9 By Values ($M) Formal Informal % 6. 1,3. 1,.4 5, ,95. Need for inclusive growth 1,6.4 5, Inclusive growth is a key 4. preoccupation of governments and policy 3. makers Social programs.1 and transfers 1. enable this 1.3 Contribution to Growth (%) Formal Informal [r] 215 [p] [r] 215 [p] Source: Fiji Bureau of Statistics

21 STRUCTURAL REFORMS Adjusting and unlocking

22 As an economy growths there are constraints and challenges as highlighted Reforming means making the necessary adjustments and changes to unlock additional possibilities and potential Reforms can unlock growth potential and distribution FJ ($) 32, 27, 22, 17, 12, 7, Actual Scenario 1 : 3% Growth Since 197 Scenario 2: 5% Growth Since ,94 12,18 7,684 2, Sources: Fiji Bureau of Statistics & Reserve Bank of Fiji

23 Resources, Productivity, Efficiency Policy prescription for reforms depend on many factors Key consideration is the country s stage of economic development Specific characteristics and factors in a country would then weigh in on the national priorities set by policy makers

24 Need to sustain the 25% target % Government Target: 25% Government Private & Public Enterprises Change in Inventories Many initiatives by Government and RBF are aimed 4.7 at fostering environment conducive to investment 12.7 RBF financial sector development and aspects of the ease of doing business indicators r 213r 214r 215p 216e 217f Source: Fiji Bureau of Statistics

25 POISED to continue growth momentum into the near to medium term RISKS remain however ENHANCING RESILENCE and STRUCTURAL REFORMS key to sustaining the momentum

26 Acknowledge assistance of Senior Economist Isoa Wainiqolo, RBF Spare slides with additional information appended

27 Percent 6. Forecast May 217 Target of 5% e 217f 218f 219f Source: Macroeconomic Committee

28 Percent How we are doing compared to our Pacific neighbours? Vanuatu Fiji 1. Average Selected PICs Fiji 8. PNG Solomons Is Samoa Percentage Sources: IMF World Economic Outlook, Regional Economic Outlook, Fiji Bureau of Statistics and Macroeconomic Committee

29

30 Visitor Arrivals and earnings will continue to strengthen in the medium term Visitor Arrivals Tourism Earnings by Country (%) s Annual May-17 Forecast 1, 8 5.% 5.% 5.% 5.% Aus, 53.8 Cont Europe & UK, p 215p 216p 217f 218f 219f F$M 2, 1,5 Gross Earnings 11% 2.7% 5.% Japan, 1.3 Pac Islands, 3.7 Rest of Asia, 1.5 Others, 6.1 Canada, 1.9 USA, 8. Malaysia,.1 NZ, , 1,62.9 1,56.2 1, p 216p 217f Sources: Fiji Bureau of Statistics and Macroeconomic Committee

31 Production has declined over the years but expected to rebound going forward 2, 1,5 1, 5 Cane Production (Seasonal) TONNES Annual May-17 Forecast 2,5 F$M * 217f 218f 219f Exports Earnings Annual May-17 Forecast -24.8% 9.5% 1.5% 37.% 1.4% -35.7% 15.5% 16.8% -2.4% Sugar Production (Seasonal) TONNES Annual May-17 Forecast 3 9.5% 16.7% 43.4% 2-2.2% f 218f 219f cents/lb Sugar Prices World Market Sugar Prices (New York) 3 WM 16/6 US13.44 cents (per pound) 2 1 Current Futures r 216p 217f 218f 219f Sources: Fiji Bureau of Statistics, FSC, Bloomberg & Macroeconomic Committee

32 Huge potential for increased production and earnings Production Export Earnings 8 m 3 Annual FBOS Estimate May-17 Forecast F$M Annual May-17 Forecast 3.8% % 16.2% 5.2% 3.1% % -1.% 2.% 2.% 2.% % e 216f 217f 218f 219f r 216p 217f 218f 219f Sources: Fiji Bureau of Statistics, and Macroeconomic Committee

33 tonnes Despite relatively flat production levels, earnings expected to rise in future Production Annual May-17 Forecast FBOS Estimate -6.3% 22.9% 4.2% -5.%.% 2.% 2.% p 214e 215e 216e 217f 218f 219f F$M Export Earnings Annual May-17 Forecast 4.5% 71.8% -2.5% 3.5% 3.8% r 216p 217f 218f 219f Sources: Fiji Bureau of Statistics and Macroeconomic Committee

34 Earnings continue to rise as a result of favorable high world market prices OUNCES Annual 8 Production May-17 Forecast %.% % 8.% 55 6 F$M f 218f 219f Annual Export Earnings May-17 Forecast 9.8% 17.% 3.1% -.6% 2.3% r 216p 217f 218f 219f Sources: Vatukoula Gold Mines Limited, Fiji Bureau of Statistics and Macroeconomic Committee

35 Earnings expected to be stable in the medium term Export Earnings F$M Annual May-17 Forecast % 8.8% -7.2% 6.6% 4.9% r 216p 217f 218f 219f F$M 15 Annual Production May-17 Forecast % 3.% 3.% 3.% 3.% e 217f 218f 219f Source: Fiji Bureau of Statistics and Macroeconomic Committee

36 Continues to expand and has a bright future ahead Export Earnings F$M 35 Annual May-17 Forecast % 6.9% 7.6% 2 7.2% 7.3% r 216p 217f 218f 219f Sources: Fiji Bureau of Statistics and Macroeconomic Committee

37 Has become the second highest foreign exchange earner for Fiji F$M Annual May-17 Forecast 6 1.2% 4.4% % f