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By RACHNA LAL
The Governor of the Reserve Bank of Fiji, Barry Whiteside says the re-emergence of fiscal and banking sector vulnerabilities in Europe would continue to pose downside risks to Fiji’s growth prospects.
This, he said, is as the external environment is expected to remain fragile.
Mr Whiteside, however, stated that Fiji’s sectoral performances and consumption-related activity in the first half of the year had been generally positive.
“This is despite the early setback of two damaging floods in January and late March.
The Reserve Bank board, at its monthly meeting on June 28, agreed to maintain the Overnight Policy Rate (OPR) at 0.5 per cent.
Meanwhile, Mr Whiteside said economic activity in the second half of the year was expected to be supported by recent developments.
“These would be in the mining and forestry sectors, new public infrastructure projects, the commencement of sugar harvesting and onset of the peak tourism season, as well as the continuation of growth in consumption related activities,” he said.
“The economy is forecast to expand by 2.7 per cent this year following an estimated two per cent expansion in 2011.”
He noted that in terms of monetary policy objectives, the outlook remained favourable, for now, with inflation easing to 4.7 per cent in May from 6.4 per cent in April.
The Governor attributed this largely because of the fading of temporary price hikes in domestic agricultural produce after the floods.
Mr Whiteside indicated these price hikes had not been prolonged because of the tremendous response by farmers to get on with their lives.
“Also the timely response by Government and other agencies in providing the necessary support, including the supply of seeds and other growing material helped,” he said.
The central bank forecasts inflation to ease to 3.5 per cent by year-end, supported by the slowing global economy, which is expected to rein in growth in global food and crude oil prices.
Foreign reserves remain adequate at around $1,488.3 million at the end of June, sufficient to cover 4.7 months of retained imports of goods and non-factor services.
With the monetary policy objectives remaining intact, Mr Whiteside said the monetary policy would continue to remain accommodative to provide the necessary impetus for domestic economic growth given the ongoing uncertainty in the global economy.