Fiji macroeconomic history 2006 current
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FIJI: MACROECONOMIC HISTORY 2006-current. Reserve Bank of Fiji PFTAC Workshop, Samoa November 2011. 2006. Buoyant domestic demand, drain on foreign reserves, widening trade deficit

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FIJI: MACROECONOMIC HISTORY 2006-current

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FIJI: MACROECONOMIC HISTORY2006-current

Reserve Bank of Fiji

PFTAC Workshop, Samoa

November 2011


2006

Buoyant domestic demand, drain on foreign reserves, widening trade deficit

Fairly strong demand conditions (Positive output gap, acceleration in Private Sector Credit Growth, Increase in imports)

Foreign reserves plummeted. Monetary policy tightened further. Credit ceiling adopted.


Monetary Policy Tools :

  • Credit Ceiling (Dec 06 – Sep 09)

  • Moral Suasion

  • Capital Controls

  • Use of Policy Indicator Rate (PIR) [RBF 91-day note]

  • Open Market Operations [suspended from Jun 07 – Apr 10]

  • Statutory Reserve Deposits


OUTPUT GAP


CREDIT GROWTH & LIQUIDITY


IMPORTS & FOREIGN RESERVES

FNPF Recall in 2006 : F$300m


MONETARY CONDITIONS


MONETARY CONDITIONS


MONETARY CONDITIONS


MONETARY CONDITIONS


2007

Continuation of credit ceiling

Tighter monetary conditions led to decline in private sector credit growth

Import demand fell

Tightening of exchange control

Foreign reserves improved

Suspension of OMO and reduction of SRD ratio from 7% to 6%

Improvement in current account balance


CREDIT GROWTH & LIQUIDITY


MONETARY CONDITIONS

Underpinned largely by machinery, transport & equipment,mineral fuel & manufactured goods


MONETARY CONDITIONS


MONETARY CONDITIONS


2008

Oil & Commodity price shocks

High prices

Recovery in domestic demand (easy monetary conditions + exchange rate appreciation)

Deterioration in the current account balance and rapid drain in foreign reserves


INFLATION


EXTERNAL SUSTAINABILITY

CAB deteriorated further, after some adjustment in 2007…


EXTERNAL SUSTAINABILITY


DOMESTIC DEMAND

Despite the rebound in Q2, import volume was relatively flat…


DOMESTIC DEMAND


DOMESTIC DEMAND

Monetary conditions was relatively easy in 2008…


EXTERNAL SUSTAINABILITY


EXTERNAL SUSTAINABILITY

REER appreciates to a new normal, suggesting that on balance there was a competitiveness loss..


EXTERNAL SUSTAINABILITY

Rapid drawdown in foreign reserves…


2009

Global financial crisis and the devaluation

Very weak domestic demand

Tight monetary conditions

High prices


EXTERNAL SUSTAINABILITY


EXTERNAL SUSTAINABILITY


EXTERNAL SUSTAINABILITY

Substantial improvement in CAB


DOMESTIC DEMAND

Demand collapses in the first 3 quarters but recover in the last quarter…


DOMESTIC DEMAND


INFLATION


MONETARY CONDITIONS

Tight monetary conditions…


EXTERNAL SUSTAINABILITY


2010 - CURRENT

Resurgence in oil & food prices + domestic structural changes (Electricity tariff and VAT)

Stagnant potential output level

Weak demand

High prices


DOMESTIC PRODUCTION

Potential output stagnant after 2005…


DOMESTIC DEMAND


DOMESTIC DEMAND


INFLATION


EXTERNAL SUSTAINABILITY

CA sustainability still a worry..


EXTERNAL SUSTAINABILITY

Foreign reserves moves around 4months cover..


END

THANK YOU


DOMESTIC DEMAND


DOMESTIC DEMAND


DEVALUATION


DEVALUATION

Immediate depreciation in the REER, representing a competitiveness boost..


DOMESTIC DEMAND

Swift adjustment in the output gap after Q2 2009..


INFLATION


DOMESTIC DEMAND

Output gap around negative territory in 2010 and expected to have moved into positive territory from Q2 2011..


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