Westpac Fiji ECONOMIC UPDATE 3 November
Outline Global Economy Domestic Economy Overview of Fiji Economy Sectoral Performances Consumption & Investment Activities Fiscal Policy Trade & Foreign Exchange Earners Tourism Earnings & Personal Remittances Financial & Monetary Aggregates Summary Twin Objectives
GLOBAL ECONOMY Weaker growth prospects Risks prevail Deceleration in China US monetary policy normalisation Implications of Brexit to the rest of the world Commodity price volatility
WORLD GDP GROWTH % 6 215 216f 217f 4 3.2 3.1 3.4 4. 4.2 4.6 2 2.1 1.6 1.8 World output Advanced Economies Emerging and Developing Economies Source: IMF World Economic Outlook October 216
PACIFIC ISLANDS GROWTH OUTOOK % 14. Papua New Guinea Solomon Islands Vanuatu Samoa Fiji 12. 1. 8. 6. 4. 2.. 4.5 3.9 3. 3.3 1.5-2. -4. 21 211 212 213 214 215e 216f 217f Source: IMF World Economic Outlook October 216
COMMODITIES
COMMODITIES World Market Sugar Prices (New York) cents/lb EU Sugar Price(USc) WM Sugar Price (USc) FJ Price F 6 u 5 t 4 22/1 FJ$46.44cents/pound u 3 r e 2 s 1 WM 22/1 US$ 22.46cents/pound 23 25 27 29 211 213 215 Sources: Bloomberg and Fiji Sugar Corporation Index FAO Food Price Index 3 MOM 2.9% YOY 1.% 25 2 15 1 5 Sep-8 Sep-9 Sep-1 Sep-11 Sep-12 Sep-13 Sep-14 Sep-15 Sep-16 Source: Global Food Price Monitor September, 216 $/oz 4, 3, 2, 1, Gold Prices (End of Month) 22/1 FJ$2,594.8/oz 22/1 US$ 1,254.8/oz 23 25 27 29 211 213 215 217 Source: Bloomberg F u t u r e s
BRENT CRUDE OIL PRICES (ACTUALS AND FUTURES) US$/barrel 14 12 1 17.58 111.94 11.82 8 6 4 2 55.7 Futures (as at 22/1/16) Oil price as at 22 October 216 Futures (as at 21/7/15) 62.38 65.56 55.65 51.53 53. 49.1 Futures (as at 15/9/16) 211 212 213 214 215 216 217 Source: Bloomberg
OVERVIEW OF THE FIJIAN ECONOMY
GDP GROWTH Fiji is set for its 7 th consecutive year of economic growth despite natural disasters this year % 6. Actual Oct-15 Forecast May-16 Forecast 4. 4. 4.2 3.5 3.6 3.1 3.1 3.2 2.4 2.. -2. 28 Gene 29 Mick 21 Tomas 211 212 Evan 213 214p 215e 216f Winston 217f 218f Sources: Fiji Bureau of Statistics & Macroeconomic
TRANS FISH WH & RETAIL FORESTRY PUB ADMIN FINANCIAL AGRI ACCOMMO EDU CONS INFO & COM MINING PROF HEALTH WATER REAL EST ADMIN MAN OTHER SER Source: Macroeconomic Committee ELECT ARTS 216 CONTRIBUTION TO GROWTH +3.5% +2.4% % 1..8.6.4.2. The services category is dominating economic activity, followed by the industrial and primary sectors.64.55.32.31.39 Services %.8.4. -.4 -.8.6 Primary -.78.51 Industry
SECTOR PERFORMANCES & EXPECTATIONS
Sectoral performances (annual percent change, unless specified otherwise) Sector 213 214 215 216 Tourism Visitor Arrivals -.4 +5.3 +9. Cum. to Sept: +4.2 T/Earnings +1.4 +6.6 +11.1 Cum. to Jun: +3.9 Forecast: +8. Gold -15.6-1.8 +9.5 Cum. to Sept: +14.3 Forecast: +1. Electricity Production Consumption +6.9 +6.6 +.2 +1.9 +3.8 +3.9 Cum. to Sept: +3.5 Cum to Aug: +.3 Cement Production +27.6 +9.6 +18.1 Cum. to Sept: +12.5 Garment Production Exports Timber Pinewood Intake Woodchip Production +4.8 +15. +26.3 +42. +3. -5.3 +35.7 +22.9-8.1 +8.8-25.3-11.2 Forecast:+5. Forecast:+7. Cum. to Aug: -38. Cum. to Aug: -43.9 Mahogany Production +17.8-7.5-5.4 Cum. to Sept: -12.8 Sources: Fiji Bureau of Statistics, Vatukoula Gold Mine Limited, Fiji Electricity Authority, Tropik wood Industries Limited, Fiji Hardwood Corporation Limited, Bureau of Statistics and Macroeconomic Committee
Sources: Fiji Sugar Corporation, Fiji Bureau of Statistics, Fisheries Companies and Macroeconomic Committee Sectoral performances are generally positive (annual percent change, unless specified otherwise) Sector 213 214 215 216 Sugar Production (cane) +4.1 +13.8 +.7 16 Jun- 1 Oct: -35.3 (99,556 tonnes) Forecast: -25.7 Production (sugar) +16.2 +26.1-2.2 16 Jun- 1 Oct: -4.2 (11,195 tonnes) Forecast: -31.4 TCTS (ratio) 9. 8.1 8.3 9. Sugar Exports -9.4 +42.7-28.3 Forecast: -26.7 Fish Production (Industry Source) -9.3-9.1 +2.5 Cum. to Jun: -22.7 Total Fish Exports -21.6 +14.7-25.5 Forecast: +2.
EXPECTATIONS FOR GENERAL BUSINESS CONDITIONS Weaker expectations but still positive % Next 3 months Next 12 months 1 8 6 4 4 62 46 67 63 8 45 83 49 78 77 77 62 63 63 82 48 72 2 Jun.12 Dec.12 Jun.13 Dec.13 Jun.14 Dec.14 Jun.15 Dec.15 Jun.16
CONSUMPTION & INVESTMENT
Consumption spending remained mixed (annual percent change, unless specified otherwise) Partial Indicators 213 214 215 216 Net VAT Domestic VAT Import VAT +11. +11.7 +2.1 +5.7 +8. +6.8 +12.4 +19.2 +2.3 Jan-Jul: -26.3* Jan-Jul: -13.8 Jan-Jul: -21.9 New Consumption Lending +89.6 +72.8 +1.2 Jan-Sept: +11.1 New Vehicle Registration +13.9 +15.8-9.5 Jan-Sept: +32.1 Second Hand Vehicle Registration +59.1 +66.9 +43. Jan-Sept: +1.7 Electricity Consumption +6.6 +1.9 +3.9 Jan-Aug: +.3 Imports of Consumption Goods +5.1 +5.8-4.5 Forecast: +18.9 Personal Remittances +1.9 +13. +28.3 Jan-Sept: +7.4 PAYE Collections +2.3 +18.6 +13.6 Jan-Jul: +3.7 Job Advertisements (FT) +9.3 +12.8 +18.7 Jan-Sept: +7.2 * due to the change in the VAT rate from 15% to 9%. consumption activity is expected to pick-up further inline with higher anticipated retailing activity post cyclone and FNPF handouts as well as loan packages provided by the banks. Sources: Fiji Revenue & Customs Authority, Land Transport Authority, Fiji Electricity Authority, Reserve Bank of Fiji, Fiji Bureau of Statistics and Macroeconomic Committee
Investment spending is also mixed (annual percent change, unless specified otherwise) Partial Indicators 213 214 215 216 New Investment Lending +18.8 +11.3 +77.7 Jan-Sept: -13.9 Domestic Cement Sales +19.8 +17.6 +42.2 Jan-Sept: +1. Completion Certificates Issued Value Number -13.5-1.7 +99.8 +7.9-5.3-2.6 Jan-Jun: -25.9 +4.7 Building Permits Issued Value Number -59.2 +1.1 +1.6 +7. +2.7 +6.2 Jan-Jun: +27.1 +4. Value of Work Put-in-Place +29. +15.2 +12.4 Jan-Jun: +1.3 Imports of Investment Goods (Excluding Aircraft) +25.1 +16. -6.4 Forecast: +11.8 Sources: Reserve Bank of Fiji, Fiji Bureau of Statistics, Basic Industries Ltd, Tengy Cement Company (Fiji) Ltd, Ministry of Finance, 215 National Budget Estimate and Budget Supplement, Bureau of Statistics and Macroeconomic Committee
Source: Reserve Bank of Fiji RBF RETAIL SALES SURVEY Annual Percent Change Stronger retail sale prospects for 216 % Dec-15 Jun-16 15 1.9 1 8.3 8.5 7.6 7.7 5 21 211 212 213 214 215 216f
% 3 Government Target: 25% INVESTMENT Share of Nominal GDP 2 Government 7.3 9. 1 Private & Public Enterprises 11.2 13.3 Change in Inventories 1.4 21 211 212 213 214p 215e Source: Fiji Bureau of Statistics
EXPECTATIONS ON INVESTMENT ACTIVITY Improved short term expectations, but medium term expectations remain unchanged for buildings and softened for plant & machinery 8 6 4 % Next 3 months Investment (Buildings) Next 12 months 38 69 69 48 % 1 8 6 4 Investment (Plant & Machinery) Next 3 months Next 12 months 86 61 64 81 2 2 Jun.12 Dec.12 Jun.13 Dec.13 Jun.14 Dec.14 Jun.15 Dec.15 Jun.16 Jun.12 Dec.12 Jun.13 Dec.13 Jun.14 Dec.14 Jun.15 Dec.15 Jun.16
FISCAL POLICY
GOVERNMENT BALANCE % of GDP 2. Underlying Deficit (Excluding Asset Sales) Net Deficit. -2. -1.6-4. -3.2-3.2-3.6-3.5-3.5-3. -3. -6. -4.7-8. -7.3 14/15 15/16 16/17 17/18 (t) 18/19 (t) Sources: Ministry of Economy, 216-217 National Budget Supplement
GOVERNMENT DEBT % of GDP 6 49.2 Domestic External Total Public Debt 51.3 51.8 47.9 5.4 47.7 4 15.6 13.4 13.8 16.2 2 33.7 34.5 33.9 34.2 14/15 15/16 Sep-16 16/17(b) 17/18(t) 18/19(t) Sources: Ministry of Economy, 216-217 National Budget Supplement
LABOUR MARKET
JOB ADVERTISEMENTS SURVEY No. 12, JAN-SEPT 18.7% 1, 8, 2.5% 7.2% 6, 4, 2, 21 211 212 213 214 215 216 Source: The Fiji Times
TRADE AND FOREIGN EXCHANGE EARNERS
OET EXPORT RECEIPTS: JAN-SEP (+5.1%) 216 ($645.8m) vs 215 ($614.2m) Total Reexports** Sugar Jan-Sep 216 Jan-Sep 215 94.1 145.4 Fish 1.6 Gold 8.7 Other Exports* 72.3 Mineral Water 8.9 TCF 45.3 Timber 26.5 2 4 6 8 1 12 14 16 F$M *Other Exports Includes: Ginger, Copra, Merchant Goods and other exports ** Total Re-exports includes: Mineral fuel and Others Source: OET
OET IMPORT PAYMENTS: JAN-SEP(+13.%) 216 ($2,615.9m) vs 215 ($2,315.8m) Other Imports Food,Beverages & Tobacco Machinery & Elec. Equip Transport Equipment Duty Free Goods Mineral Fuels Chemicals TCF Raw Materials Government Imports Merchanted Goods 13.6 32.1 Jan- Sep 216 Jan- Sep 215 314.1 199.8 266. 111.4 92.3 79.1 454.6 481.2 571.7 1 2 3 4 5 6 7 F$M Source: OET
TRADE BALANCE OET F$M Export Imports Trade Bal Jan-Sep 4, 3, 3324. 325.3 2875.2 2516. 2623.6 2615.9 2, 1, 627.7 88.9 995.1 111.2 822.7 645.8-1, -2, -3, -1377.2-137.3-1316.3-197.2-168.3-171.6 211 212 213 214 215 216 (Jan-Sep) Source: OET
MAJOR FOREIGN EXCHANGE EARNERS $M 2, 211 212 213 214 215 1,5 1,56 1, 5 492 2 144 93 13 118 89 Tourism Receipts Remittances Mineral Water Sugar Gold Fish Garments Timber Sources: FBOS and
TOURISM EARNINGS & PERSONAL REMITTANCES
PERSONAL REMITTANCES Personal remittances slowing driven largely by personal receipts F$M 8 7 6 Jan-Sep 23% 11% F$M 5 45 4 35 Gifts, Maintenance & Donations Personal Receipts Immigrant Transfers 35.2 5 28% 3 4 3 7.4% 25 2 15 2 1 6.5 1 29 21 211 212 213 214 215p 216f 217f 5-5 Sep-14 Nov-14 Jan-15 Mar-15May-15 Jul-15 Sep-15 Nov-15 Jan-16 Mar-16May-16 Jul-16 Sep-16. Sources: OET & Macroeconomic Technical Committee
TOURISM EARNINGS F$M 1,8 Jan-Jun 8% 5% 1,6 11% 1,4 1,2 1, 8 1.6% 3.9% 6 4 689 715 2 26 27 28 29 21 211 212 213 214 215p 216f 217f Sources: Fiji Bureau of Statistics and Macroeconomic Committee
MONETARY & FINANCIAL INDICATORS
BROAD MONEY & CREDIT Monetary conditions remain favourable but credit growth slowing % 3 Broad Money Domestic Credit Net Foreign Assets (RHS) 14 12 % Domestic Credit Private Sector Credit 3 2 1 8 2 1 6.6 6 4 1 1.3 5.4 2 6.6 3.5-2 -4-1 -6 Sep-1 Sep-11 Sep-12 Sep-13 Sep-14 Sep-15 Sep-16-1 Sep-1 Sep-11 Sep-12 Sep-13 Sep-14 Sep-15 Sep-16 Source: Reserve Bank of Fiji
COMMERCIAL BANKS NEW LENDING, SEPT Slow growth due to reduced new investment related lending F$M 2, 1,5 Total Y-O-Y (rhs) 1827 174 1461 % 2 15 1 F$M 2, 1,5 Others Professional & Business Services Electricity, Gas & Water Building & Construction Transport & Storage Real & Estate Manufacturing Private Individuals Wholesale, Retail, Hotels & Restaurants 1461 174 1827 1, 5 1, 29.9 16.6 7.2 5 5-5 26 27 28 29 21 211 212 213 214 215 216-1 26 27 28 29 21 211 212 213 214 215 216 From March 214 HFC lending is included in Commercial Banks Source: Reserve Bank of Fiji
BANKS NEW INVESTMENT & CONSUMPTION LOANS, SEPT Credit growth remains positive, but annual slowing is investment-related F$M Building & Construction % 4 Real Estate 38 15 Y-o-Y (rhs) 35 327 94.9 1 3 F$M 7 6 5 Private Individuals (Others) WRHR Y-o-Y (rhs) 562 563 626 % 6 5 4 25 2 195 5 4 3 2 15 1 14.2-13.9-5 3 2 44..2 11.1 1 5 1-1 26 27 28 29 21 211 212 213 214 215 216-1 26 27 28 29 21 211 212 213 214 215 216-2 From March 214 HFC lending is included in Commercial Banks Source: Reserve Bank of Fiji
BANKS LIQUIDITY Ample liquidity exists and interest rates at historical lows INTEREST RATES F$M 8 7 6 5 57 4 3 2 1 Oct-9 Oct-1 Oct-11 Oct-12 Oct-13 Oct-14 Oct-15 Oct-16 As at 21 October, 216 % Outstanding Lending Savings Deposit Time Deposit 1. 8. 6. 5.86 4. 2.9 2..91. Sep-8 Sep-9 Sep-1 Sep-11 Sep-12 Sep-13 Sep-14 Sep-15 Sep-16 % 12. New Lending New Time Deposit 1. 8. 5.34 6. 4. 2.64 2.. Sep-8 Sep-9 Sep-1 Sep-11 Sep-12 Sep-13 Sep-14 Sep-15 Sep-16 Source: Reserve Bank of Fiji
MOVEMENTS IN F$ AGAINST BASKET CURRENCIES CHANGE IN VALUE OF FJD AUD NZD JPY USD EUR 3 th September 16.6382.6717 49.28.4875.4344 MONTHLY % CHANGE -.9.3-1.1.8.1 ANNUAL % CHANGE -2.8-7.1-1.4 6.2 6.5 % CHANGE FROM 1 st JAN TO 3 th SEP 16-1. -2.3-12.7 3.7.3 % CHANGE FROM 15 th APR 9* TO 3 th SEP 16 1.5-14.1 9.4 7. 26.5 * 15 th April 9 was the last devaluation of the FJD Source: Reserve Bank of Fiji
REER/NEER (Monthly Average) Index 115. 11. 15. REER 13.65 1. 95. 9. 85. NEER 85.31 8. Sep-8 Mar-9 Sep-9 Mar-1 Sep-1 Mar-11 Sep-11 Mar-12 Sep-12 Mar-13 Sep-13 Mar-14 Sep-14 Mar-15 Sep-15 Mar-16 Sep-16 Source: Reserve Bank of Fiji
TWIN OBJECTIVES
INFLATION Headline Inflation Contribution to Inflation % 1. 8. Monthly % Change Headline % 5.6% 3.7 4. 3.5 3. 6. 5.6 2.5 2. 2.2 4. 2. 1.5 1..5 1.. -2. -4. 21 211 212 213 214 215 216. -.5-1. Alcoholic Beverages, Tobacco & Narcotics Food & Nonalcoholic Beverages Education.1 Restaraunts & Hotels -.1 Others* -.6 Housing, Water, Elec., Gas & other Fuels *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
FOREIGN RESERVES F$M 2,5 MORI 7. 2, 1,5 Benchmark MORI Cover Retained Imports Cover 5.9 5.5 1,944 1,982 6. 5. 4. 1, 3. 5 2. 21 211 212 213 214 215 25/9/216 1. Source: Reserve Bank of Fiji
SUMMARY Domestic economic prospects remain firm against the subdued global outlook Opportunities exist for various sectors Labour market conditions remain positive. Private sector optimism persists Supportive fiscal and monetary policy stances Inflation rose due to TC Winston and Floods. Expected to be 3.5% by year-end. Foreign reserves are currently comfortable at $1,981 (5.5 MORI) and expected to remain comfortable for the rest of 216.
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