Presentation to the FIA CURRENT ECONOMIC CONDITIONS 5 October 2017
Global economic outlook Has improved
Global Economy Consolidating Healthy Growth Trajectory Global growth (%) Source: 2017 July IMF World Economic Outlook Sources: International Monetary Fund
TRADING PARTNER GROWTH OUTLOOK 4.0 % 3.8 2016e 2017f 2018f 2.6 2.0 2.1 2.2 1.4 2.0 0.0 Fiji United States Australia New Zealand Japan Eurozone Source: August Consensus/Asia Pacific Consensus Forecast
PACIFIC ISLANDS AVERAGE GROWTH RATE (2012-16) % Fiji Papua New Guinea Samoa Solomon Islands Vanuatu 6.0 5.5 5.0 4.0 3.0 3.1 2.9 2.0 1.6 1.9 1.0 0.0 Fiji Papua New Guinea Samoa Solomon Islands Vanuatu Sources: IMF s Regional Economic Outlook- April 2017
FIJI GDP GROWTH % Actual May-17 Forecast 6.0 5.6 4.7 4.0 3.0 2.7 3.8 3.6 3.8 3.0 2.9 2.0 1.0 1.4 0.4 2.0 0.0-2.0-1.4 2008 2009 2010 2011 2012 2013 2014r 2015P 2016P 2017f 2018f 2019f Gene Mick Tomas Evan Winston Sources: Fiji Bureau of Statistics & Macroeconomic Committee
2016 GROWTH LOWER THAN EXPECTED +2.0% +0.4% 2016P Forecast 2016P Forecast ARTS HEALTH OTHER SER REAL EST ADMIN EDU PROF INFO & COM ACCOMMO FINANCIAL PUB ADMIN WH & RETAIL TRANS -6.8-6.3 Services -2.4 0.3 1.7 1.8 2.2 2.4 2.7 3.9 4.5 5.7 7 ELECT MAN WATER MINING CONS AGRI FORESTRY FISH -21.9 Industry -7.6-1.9-1.1-1.6 2.3 6.2 11.7 Primary -10-5 0 5 10-30 -20-10 0 10 20 Source: Fiji Bureau of Statistics and Macroeconomic Committee
Sector Performances so far Generally positive
2017 SECTOR CONTRIBUTION TO GROWTH +3.8% % 0.7 0.5 0.3 0.1 0.34 Primary 0.01 0.01 0.61 0.44 0.10 Industry 0.02 0.01-0.1-0.3-0.5 AGRI FISH FORESTRY MAN CONS ELECT MINING WATER 0.6 0.4 0.2 % 0.0 0.45 0.41 0.41 0.32 0.20 Services 0.15 0.13 0.09 0.06 0.04 0.03 0.03 0.01-0.2-0.4-0.6 FINANCIAL WH & RETAIL TRANS ACCOMMO INFO & COM PUB ADMIN EDU PROF ADMIN REAL EST OTHER SER HEALTH ARTS Source: Macroeconomic Committee
Aggregate Demand Continues to be Buoyant
Consumption spending is firm Partial Indicators Annual percent change (unless otherwise specified) Partial Indicators 2016 2017 (latest) Net Value Added Tax (VAT) New Consumption lending o/w Wholesale, Retail, Hotels & Restaurants o/w Private Individuals New Vehicle Registrations Secondhand Vehicle Registrations -26.9 Jan-Jul: +14.0 +7.9 Jan-Aug: +10.5 +13.2 Jan-Aug: +30.2-4.7 Jan-Aug: -33.0 +27.5 Jan-Aug +2.7 +7.8 Jan-Aug:-31.9 Consumption activity in the short to MT is expected to be supported by the 2017-18 National Budget - lower VAT, low interest rates, market stability and confidence Source: Industry contacts
Investment remains strong Partial Indicators Annual percent change (unless otherwise specified) Partial Indicators 2016 2017 (Latest) New Investment Lending Real Estate -10.3 Jan-Aug +31.8-17.9 Jan-Aug: +60.4 Building and Construction Domestic Cement Sales Domestic Cement Production Estimated Value of Work put-in-place -1.0 Jan-Aug: +5.4 +11.1 Jan-Aug: +16.0 +10.9 Jan-Jul: -3.8 +10.1 +5.6 (Q1 2017) The strong growth in investments continues to be driven by some large local projects in the hotel and wholesale & retail sectors Source: Industry contacts
INVESTMENT Share of Nominal GDP % 30 27.6 26.0 23.0 20 Government 19.0 4.7 16.3 8.0 8.3 4.8 10 Private & Public Enterprises Change in Inventories 12.7 11.5 15.0 17.7 0 2010 2011 2012r 2013r 2014r 2015p 2016e 2017f 1.6 Source: Fiji Bureau of Statistics
BUSINESS EXPECTATIONS SURVEY - June 2017 % (Net) 100 80 60 40 80 83 63 45 Overall Business Confidence Next 6 months Next 12 months 78 77 77 82 72 66 63 62 63 49 48 69 50 20 24 0 Jun.13 Dec.13 Jun.14 Dec.14 Jun.15 Dec.15 Jun.16 Dec.16 Jun.17 Source: Reserve Bank of Fiji
External balances expected to remain stable 2,500 Trade Balance* Service, Primary & Secondary Income Current Account* 2,000 1,500 1,000 1,301 500 1,597 1,794 1,794 1,870 1,998 0-496 -500-288 -1,000-1,797-1,885-1,500-495 -573-574 -544-2,288-2,367-2,445-2,542 Current Account Deficit (F$M) -2,000-2,500-3,000 2014p 2015p 2016e 2017f 2018f 2019f Sources: Reserve Bank of Fiji and Fiji Bureau of Statistics; *: excluding aircraft
$M 1,800 1,600 1,400 1,200 MAJOR FOREIGN EXCHANGE EARNERS Services Commodities 2012 2013 2014 2015 2017(f) 1683 $M 300 2012 2013 2014 2015 2017(f) 255 250 200 1,000 800 150 120 120 137 122 600 565.6 100 74 400 200 50 0 Tourism Rcpts Remittances 0 Mineral Water Sugar Gold Fish Garments** Timber Sources: RBF & FIBOS
Labour market & financial conditions Remain optimistic and supportive of growth
Labour market remains upbeat No 25,000 Total (FT & FS) Cum to August 20,000 15,000 15.1% 10,000 5,000 15,172 13,943 16,053 0 2015 2016 2017 Sources: RBF
Strong reserves & credit boost money growth % Broad Money Domestic Credit Net Foreign Assets (RHS) % Domestic Credit Private Sector Credit 30 60 30 50 20 40 20 10 21.6 10.8 8.1 30 20 10 13.0 8.1 10 0 0 0-10 -10-20 Aug-10 Aug-11 Aug-12 Aug-13 Aug-14 Aug-15 Aug-16 Aug-17-10 Aug-10 Aug-11 Aug-12 Aug-13 Aug-14 Aug-15 Aug-16 Aug-17 Source: Reserve Bank of Fiji
Contribution to Bank Lending - August 2017 The 9.4 percent annual growth is largely due to corporate investment lending % 4.5 3.5 2.5 1.5 0.5-0.5-0.1 Agriculture 0.0 Mining and Quarrying 0.8 Manufacturing Building and 1.2 construction Wholesale, 2.3 Retail,hotels& rests 1.5 Private Individuals 3.0 Real Estate 0.3 Transport & Storage Electricity, gas and -0.1 water Professional & 0.3 Business Services 0.0 NBFIs -0.3 Public Ent. Central and Local 0.0 Govt 0.5 Others Source: Reserve Bank of Fiji
Bank liquidity levels remain adequate F$M 900 800 807 700 600 500 400 300 200 100 0 As at 2 October 2017 Oct-10 Oct-11 Oct-12 Oct-13 Oct-14 Oct-15 Oct-16 Oct-17
New bank interest rates remain low % Outstanding Lending Savings Deposit Time Deposit % New Lending New Time Deposit 10.0 10.0 8.0 8.0 6.0 5.71 6.0 5.72 4.0 3.35 4.0 3.00 2.0 1.36 2.0 0.0 Aug-08 Aug-09 Aug-10 Aug-11 Aug-12 Aug-13 Aug-14 Aug-15 Aug-16 Aug-17 0.0 Aug-08 Aug-09 Aug-10 Aug-11 Aug-12 Aug-13 Aug-14 Aug-15 Aug-16 Aug-17 Source: Reserve Bank of Fiji
Monetary Policy To maintain price stability & reserves adequacy
INFLATION Contribution to Inflation September % 2.0% 4.0 3.0 3.3 2.0 1.0 0.0-1.0 0.4 0.5 0.1 0.0-0.2-2.0-2.2-3.0 Alcoholic Housing, Water, Transport Restaurants & Furnishings, Hhld. Food & Non- Others* Beverages, Elec., Gas & other Hotels Equip. & Routine alcoholic Tobacco & Fuels Hhld. maintenance Beverages Narcotics *Others include Health, Communication. Furnishings, Hhld., Equip. Routine Hhld. maintenance, Recreation & Culture, Clothing & Footwear and Misc. Sources: Reserve Bank of Fiji and Fiji Bureau of Statistics
IMPORTED & DOMESTIC INFLATION % 8.0 Domestic Imported Headline 6.0 4.0 2.0 2.0 1.6 0.0 0.4-2.0-4.0 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Sources: Reserve Bank of Fiji and Fiji Bureau of Statistics
INFLATION Headline & Core September % Monthly % Change Headline Trimmed Mean Core (excl. Food; Energy; Education and Kava) 8.0 7.0 6.0 5.0 4.0 3.0 2.0 1.0 2.0 1.6 0.8 0.0-1.0-2.0 12/2014 01/2015 02/2015 03/2015 04/2015 05/2015 06/2015 07/2015 08/2015 09/2015 10/2015 11/2015 12/2015 01/2016 02/2016 03/2016 04/2016 05/2016 06/2016 07/2016 08/2016 09/2016 10/2016 11/2016 12/2016 01/2017 02/2017 03/2017 04/2017 05/2017 06/2017 07/2017 08/2017 09/2017 Sources: Reserve Bank of Fiji and Fiji Bureau of Statistics
INFLATION FORECAST 2017-2019 % 7.0 6.0 5.6 Actual September 2017 Forecast 5.0 4.0 3.0 2.0 1.0 2.5 2.5 2.0 0.0-1.0 Dec-14 Jun-15 Dec-15 Jun-16 Dec-16 Jun-17 Dec-17 Jun-18 Dec-18 Jun-19 Dec-19 Source: Fiji Bureau of Statistics and Reserve Bank of Fiji Estimates
FOREIGN RESERVES F$M RBF Holdings Retained Imports Cover MORI 3,000 10.0 2,500 2,000 1,500 1,000 500 0 Benchmark MORI Cover 1,091 805 549 515 559 4.4 3.3 2.3 1.9 1.9 2,412 1,944 1,921 1,811 1,778 1,636 6.0 1,513 1,303 5.8 6.1 5.0 5.4 5.6 5.3 4.7 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 5/10/17 9.0 8.0 7.0 6.0 5.0 4.0 3.0 2.0 1.0 Source: Reserve Bank of Fiji
SUMMARY Global economy consolidating healthy growth trajectory; Domestic growth; upward bias for this year; Sectoral performances positive overall; Demand supported by positive consumer & business sentiments; adequate monetary conditions & favourable employment outlook Monetary policy objectives intact Inflation was 2.0% in September; year end forecast at 2.5%; Reserves at record high $2.4b in September; similar levels by year end; Monetary & fiscal policies continue to support growth/financial stability.
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