The Reserve Bank says the Fijian economy is anticipated to contract severely this year with sectoral performances significantly weak to date.[Source: Central Banking]

The Reserve Bank says the Fijian economy is anticipated to contract severely this year with sectoral performances significantly weak to date.

Governor Ariff Ali says recent partial indicators for consumption and investment continue to point to falling aggregate demand while overall labour market conditions have worsened with ongoing job losses.

Ali says given the weak economy, domestic credit has slowed further and the number of non-performing loans has risen.

He says the financial system continues to be assessed as sound, underpinned by solid capitalisation and liquidity ratios.

The RBF Governor says commercial banks’ cost of funds has generally fallen owing to the high levels of excess liquidity which totalled $796.9 million as at 24 June.

In addition, the easing of some COVID-19 restrictions by the Government will see the restart of some economic activity.

Ali says annual inflation remained in negative territory in May (-1.7%) and is forecast to edge up to 1.0 percent by year-end.

He says foreign reserves are around $2,203.9 million sufficient to cover 6.9 months of retained imports and are expected to remain comfortable in the medium-term.

Governor Ali says the unveiling of the National Budget next month could catalyse economic activity further and that the Reserve Bank will maintain its current accommodative stance given the stable outlook for foreign reserves and inflation.

He adds RBF will continue to monitor economic developments and risks closely, and align monetary policy where appropriate.