FIJIAN ECONOMY RISKS AND CHALLENGES FIA Workshop, 23-24 June 217 Esala Masitabua
BIG PICTURE RISKS CHALLENGES CONCLUDING REMARKS
unprecedented period of growth % 6. 5. 4. 3. 2. 1. 1.9 Actual Forecast as @ Oct 16 Forecast as @May17 5.6 4.7 3.6 3.8 3. 3.6 3. 3. 2.7 2. 3. 2.9 2. 1.4 1. Growth despite recent natural disasters Economy showing resilience Looking into the next few years expect continuation of growth. -1. -.9-1.4-2. 26 27 28 Gene 29 Mick 21 Tomas 211 212 Evan 213 214r 215p 216f Winston 217f 218f 219f
Percent Percent Recovery in 217 broad based growth across sectors.8 Accommodation & Food Services Wholesale & Retail 12% 7% 14% Financial, Insurance & Real Estate.6.4.2. -.2.62.61.43.32.31.28 216: 2.%.15.12.11.3.5.4.6.3.2.3 -.5 -.15 Agri, Forestry, Fishing & Mining 1% 12% Tourism 29% 2% Social Infrastructure -.4 -.6 -.8-1. -.97 T&SWRTPub Fin Con Acc Info Pro Edu MQAdm Ele RE Oth Hlt FishFrstyMan Agr Manufacturing 25%.7.6.61 217: 3.8% General Services After TC Winston impact all sectors expecting to grow in 217/218.5.4.3.2.1..45.44.41.41.34.32.2.15.13.1.9.6.4.3.3.2.1.1 Man Fin ConWRTT&S Agr Acc Info Pub Edu Ele Prof Adm RE Oth Hlth MQ Frst Fish
How we are we faring comparatively? % 14. 12. 1. 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 8. 6. 4. 2.. -2. -4. 211 212 213 214 215 216e 217f 218f
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
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
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
DEBT SUSTAINABILITY FISCAL CONSOLIDATION
% of GDP Domestic External Total Public Debt 6 51.3 51.8 49.2 5.4 47.9 42.6 4 2 15.6 13.4 16.2 12.4 33.7 34.5 34.2 3.2 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, 216-217 National Budget Supplement
% of GDP Underlying Deficit (Excluding Asset Sales) Net Deficit 2.. -2. -1.6-4. -3.2-3.2-3. -3. -3.6-3.5-3.5-4.7-6. -8. -7.3 14/15 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, 216-217 National Budget Supplement
PRESERVING MONETARY AND FINANCIAL STABILITY
Need to build buffers Keep in check F$M MORI % 1. 2,5 2, 1,5 1, Benchmark MORI 3.3 2.3 515 85 559 4.4 1,91 4.7 1,33 Retained Imports Cover 1,944 6.1 1,811 5.8 1,778 5.6 5.3 5.4 1,636 1,513 2,255 1,921 5.6 5. 8. 7. 6. 5. 4. 3. 8. 6. 4. 2. 2.5 5 549 2.. 1.9 1.9 1. 25 26 27 28 29 21 211 212 213 214 215 2166/2/217 Source: Reserve Bank of Fiji -2. 21 21 1 21 2 21 3 21 4 21 5 21 6 21 7
Financial stability as credit cycle eases F$M 14. 12. 1. 8. 6. 4. Housing Personal Transport Others Annual % Change 17.9 % 35. 3. 25. 2. 15. 11.3 1. 5. % 25. 2. 15. 1. 5. Housing Personal Transport Others As the recent credit upswing eases financial stability requires increased vigilance RBF prioritizing Credit Bureau as an industry concern 2... 27 28 29 21 211 212 213 214 215 216-5.. 27 28 29 21 211 212 213 214 215 216-5. Source: Reserve Bank of Fiji
Openness diversification $M 2, 1,5 1, 5 1638.2 541.8 214.4 212 213 214 215 216 113. 121. 132.5 114.7 63.8 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
$M 8,. 7,. 6,. 5,. 4,. 3,. 2,. 1,. 99.9 4,828.9 By Values ($M) Formal Informal % 6. 1,3. 1,.4 5,433.9 5,95. Need for inclusive growth 1,6.4 5,66.5 5. Inclusive growth is a key 4. preoccupation of governments and policy 3. makers 2. 1.4 Social programs.1 and transfers 1. enable this 1.3 Contribution to Growth (%) Formal Informal 5.6. 4.7.2 3.6.1 5.6 4.6 3.5. 212 213 214 [r] 215 [p]. 212 213 214 [r] 215 [p] Source: Fiji Bureau of Statistics
STRUCTURAL REFORMS Adjusting and unlocking
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 ($) 32, 27, 22, 17, 12, 7, Actual Scenario 1 : 3% Growth Since 197 Scenario 2: 5% Growth Since 197 28,94 12,18 7,684 2, 197 1975 198 1985 199 1995 2 25 21 215 Sources: Fiji Bureau of Statistics & Reserve Bank of Fiji
Resources, Productivity, Efficiency Policy prescription for reforms depend on many factors Key consideration is the country s stage of economic development Specific characteristics and factors in a country would then weigh in on the national priorities set by policy makers
Need to sustain the 25% target % 3 2 1 Government Target: 25% Government Private & Public Enterprises Change in Inventories Many initiatives by Government and RBF are aimed 4.7 at fostering environment conducive to investment 12.7 RBF financial sector development and aspects of the ease of doing business indicators 4.8 11.5 7.9 8.5 15.7 16.2 1.6 21 211 212r 213r 214r 215p 216e 217f Source: Fiji Bureau of Statistics
POISED to continue growth momentum into the near to medium term RISKS remain however ENHANCING RESILENCE and STRUCTURAL REFORMS key to sustaining the momentum
Acknowledge assistance of Senior Economist Isoa Wainiqolo, RBF Spare slides with additional information appended
Percent 6. Forecast as @ May 217 Target of 5% 5. 4. 3.8 3. 3. 2.9 2. 2. 1.. 216e 217f 218f 219f Source: Macroeconomic Committee
Percent How we are doing compared to our Pacific neighbours? 217 216 215 214 Vanuatu Fiji 1. Average Selected PICs Fiji 8. PNG 6. 4. 2. Solomons Is Samoa. -2. -4. 212 213 214 215 216 217. 2. 4. 6. 8. 1. 12. Percentage Sources: IMF World Economic Outlook, Regional Economic Outlook, Fiji Bureau of Statistics and Macroeconomic Committee
Visitor Arrivals and earnings will continue to strengthen in the medium term Visitor Arrivals Tourism Earnings by Country (%) - 216 s Annual May-17 Forecast 1, 8 5.% 5.% 5.% 5.% Aus, 53.8 Cont Europe & UK, 7.9 6 4 792 832 874 917 2 21 211 212 213 214p 215p 216p 217f 218f 219f F$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, 15.7 1, 1,62.9 1,56.2 1,683 5 26 27 28 29 21 211 212 213 214 215p 216p 217f Sources: Fiji Bureau of Statistics and Macroeconomic Committee
127.1 174.6 142.2 129.4 13.1 12.4 139.1 153.6 21.4 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$M 25 2 15 1 5 21 211 212 213 214 215 216* 217f 218f 219f Exports Earnings Annual May-17 Forecast -24.8% 9.5% 1.5% 37.% 1.4% -35.7% 15.5% 16.8% -2.4% Sugar Production (Seasonal) TONNES Annual May-17 Forecast 3 9.5% 16.7% 43.4% 2-2.2% 1 21 211 212 213 214 215 216 217f 218f 219f cents/lb Sugar Prices World Market Sugar Prices (New York) 3 WM 16/6 US13.44 cents (per pound) 2 1 Current Futures 211 212 213 214 215r 216p 217f 218f 219f 211 213 215 217 Sources: Fiji Bureau of Statistics, FSC, Bloomberg & Macroeconomic Committee
62.1 68.9 63.9 81.3 74.1 78. 8.4 9.5 93.2 Huge potential for increased production and earnings Production Export Earnings 8 m 3 Annual FBOS Estimate May-17 Forecast F$M Annual May-17 Forecast 3.8% 1 9 8 3.% 16.2% 5.2% 3.1% 6-11.8% -1.% 2.% 2.% 2.% 7 6-31.4% 4 5 2 64 564 58 518 528 539 4 3 2 1 21 211 212 213 214 215e 216f 217f 218f 219f 211 212 213 214 215r 216p 217f 218f 219f Sources: Fiji Bureau of Statistics, and Macroeconomic Committee
57.8 95. 95.1 79.1 135.9 132.4 137.1 142.3 148.8 tonnes Despite relatively flat production levels, earnings expected to rise in future 35 3 25 2 15 1 5 Production Annual May-17 Forecast FBOS Estimate -6.3% 22.9% 4.2% -5.%.% 2.% 2.% 12.8 15.8 16.5 15.6 15.6 15.9 16.3 21 211 212 213p 214e 215e 216e 217f 218f 219f F$M 16 14 12 1 8 6 4 2 Export Earnings Annual May-17 Forecast 4.5% 71.8% -2.5% 3.5% 3.8% 211 212 213 214 215r 216p 217f 218f 219f Sources: Fiji Bureau of Statistics and Macroeconomic Committee
143. 136.9 11.2 91. 93.1 121. 12.3 14.7 154.5 Earnings continue to rise as a result of favorable high world market prices OUNCES Annual 8 Production May-17 Forecast 6 4 2 13.7%.% 48 48 15.% 8.% 55 6 F$M 18 16 14 12 1 8 6 4 2 21 211 212 213 214 215 216 217f 218f 219f Annual Export Earnings May-17 Forecast 9.8% 17.% 3.1% -.6% 2.3% 211 212 213 214 215r 216p 217f 218f 219f Sources: Vatukoula Gold Mines Limited, Fiji Bureau of Statistics and Macroeconomic Committee
93.5 92.9 17. 11.1 11. 12. 18.8 114.1 12.5 Earnings expected to be stable in the medium term Export Earnings F$M Annual May-17 Forecast 14 12 1 8 6 4 2 5.6% 8.8% -7.2% 6.6% 4.9% 211 212 213 214 215r 216p 217f 218f 219f F$M 15 Annual Production May-17 Forecast 1 5-8.1% 3.% 3.% 3.% 3.% 69 71 74 76 78 21 211 212 213 214 215 216e 217f 218f 219f Source: Fiji Bureau of Statistics and Macroeconomic Committee
127.4 16.6 156.4 186.3 199.8 214.4 255.1 272.7 293.5 Continues to expand and has a bright future ahead Export Earnings F$M 35 Annual May-17 Forecast 3 25 19.% 6.9% 7.6% 2 7.2% 7.3% 15 1 5 211 212 213 214 215r 216p 217f 218f 219f Sources: Fiji Bureau of Statistics and Macroeconomic Committee
Has become the second highest foreign exchange earner for Fiji F$M Annual May-17 Forecast 6 1.2% 4.4% 5 28.3% 4 3 491.7 541.8 565.6 2 294. 295.4 29.4 35.8 339.1 383.2 1 29 21 211 212 213 214 215 216 217f