Reserve Bank of Fiji, Suva. [File Photo]

The economic recovery remains contingent on the resumption of international travel at least with major markets.

Reserve Bank Governor Ariff Ali says this includes Australia and New Zealand.

Ali says the economy could contract further if borders do not open this year, however, a marginal economic recovery could eventuate if borders open towards the end of the year.

In addition, Ali says economic recovery will also depend on the level of fiscal support provided by the Government in the 2021-22 national budget.

On a positive note, the RBF’s December Business Expectations Survey shows that overall business confidence has improved slightly from six months ago, possibly reflecting the successful containment of the virus locally, businesses adjusting to the new norm and concrete steps towards immunisation across the globe.

Ali added the financial sector is stable and banks have increased their provisioning allocation to account for potential loan defaults while extending the moratorium on a case-by-case basis.

Liquidity in the banking system remains sufficient at over $902 million prompting the decline in banks’ cost of funds over the month.

Ali highlighted the prolonged crisis also means that unemployment benefits need to continue, for which the Government in collaboration with the Fiji National Provident Fund has paid out $223.2 million to affected members, of which $106.1 million was topped up by the Government.”

Annual inflation was -1.3 percent in January but is likely to increase over the coming months as prices of locally produced fruits and vegetables are projected to rise due to supply shortages owing to Tropical Cyclone Ana and the associated floods.

Nonetheless, Ali says the increase is expected to be temporary and subside afterwards, resulting in the 2021 year-end inflation forecast being unchanged at 1.5 percent.