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FIJI’S MACROECONOMIC SITUATION AND RBF’S OBJECTIVES
March 2018
Presentation to
Industry Stakeholders
Governor | Mr. Ariff Ali
PRESENTATION OUTLINE
How is the global economy doing?
What is happening to the Fijian economy?
Are the latest key economic indicators consistent with our growth estimates?
Are the financial sector indicators in line with our assessment of the economy?
What is happening in the labour market?
How is the external sector performing?
Where is Government's Fiscal Policy heading?
Are the monetary policy objectives intact?
What are the key risks and challenges?
Summary
WORLD & TRADING PARTNERS: GDP GROWTH
Global growth
Source: 2018 January IMF WEO
4.0 4.2
3.0
-0.1
5.4
4.2
3.5
3.5 3.6
3.4 3.2
3.6 3.7
3.7 3.9 3.9
-0.2
0.8
1.8
2.8
3.8
4.8
5.8
6.8
% Forecast @ Oct '17 Forecast @ Jan '18
7.8
6.4
2.9
2.7
0.9
1.9
2.5
7.4
6.6
3.0
2.7
1.2
2.2
2.7
6.7
6.8
2.8
2.3
1.8
2.4
2.3
7.1
6.7
3.6
2.5
0.9
1.8
1.5
0 2 4 6 8 10
India
China
New Zealand
Australia
Japan
Eurozone
UnitedStates
%
2016
2017
2018f
2019f
Major Trading Partners
Source: Macroeconomic Committee
3.0 2.7
1.4
4.7
5.6
3.8
0.4
4.2
3.6 3.2 3.2
-2.0
-1.0
0.0
1.0
2.0
3.0
4.0
5.0
6.0
2010Tomas
2011 2012 Evan 2013 2014r 2015r 2016pWinston
2017f 2018f 2019f 2020f
%
Actual Forecast as @Oct 17
Low & volatile growth Consistent positive growth Stable growth
ECONOMIC GROWTH Projected 11 years of consecutive economic growth
0.09
0.03 0.03
0.55
0.30
0.07 0.07
0.34 0.30
0.28 0.29 0.32
0.46
0.15 0.14
0.06
0.15
0.0
0.1
0.2
0.3
0.4
0.5
0.6
AG
RI
FISH
FOR
ESTR
Y
MA
NU
CO
NS
ELEC
& W
ATE
R
MIN
ING
TRA
NS
WH
& R
ETA
IL
FIN
AN
CIA
L
AC
CO
M
INFO
& C
OM
PU
B A
DM
IN
EDU
PR
OF
AD
MIN
OTH
ER S
ER
%
Forecast as @ Sept 17
Primary 0.15%
+3.6%
Source: Macroeconomic Committee
Services 2.49%
Industry 0.99%
**other services include administration & support services, real estate, arts & entertainment, health and other service activities
2018: CONTRIBUTION TO GROWTH Broad based growth anticipated in 2018
CONSUMPTION SPENDING REMAINS FIRM
Source: Industry contacts
Net VAT Collections
13.9%
0
200
400
600
800
1,000
2010 2011 2012 2013 2014 2015 2016 2017
F$M
Vehicle Registrations
Commercial Banks’ New Consumption Lending Wholesale & Retail Trade Survey
12.1%
0
200
400
600
800
1,000
1,200
2010 2011 2012 2013 2014 2015 2016 2017
F$M
8.7%
-30.2%
0
6,000
12,000
18,000
2010 2011 2012 2013 2014 2015 2016 2017
No. New Vehicles Secondhand Vehicles
5.6% 2.4%
0
1000
2000
3000
4000
5000
2010 2011 2012 2013 2014 2015 2016 2017
F$M Annual Cum to Qtr. 3
INVESTMENT Partial Indicators of Investment are Strong
Source: RBF and Industry contacts
11.1% 2.2%
0
50
100
150
200
250
2010 2011 2012 2013 2014 2015 2016 2017
‘000 TONNES
10.1%
10.5% 5.1%
0
100
200
300
400
500
600
2010 2011 2012 2013 2014 2015 2016 2017
F$M Annual Jan-Sep
Commercial Banks’ New Investment Lending Government's Actual Capital Expenditure
Value of Work Put in Place Domestic Cement Sales
1779
0
300
600
900
1200
1500
1800
2100
2010 2011 2012 2013 2014 2015 2016 FY16-17 FY17-18(b)
F$M Actual Capital Budgeted Capital
0
100
200
300
400
500
600
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
F$M Building & Construction Real Estate
558
446
OVERALL BUSINESS SENTIMENTS REMAIN POSITIVE
Source: RBF
Overall Business Confidence (Net %) Commercial Banks’ New Lending
2489
2729
0
500
1,000
1,500
2,000
2,500
3,000
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
F$M
65 75
-80
-60
-40
-20
0
20
40
60
80
100
% (Net) Next 6 months Next 12 months
Source: Reserve Bank of Fiji
MEDIUM-TERM INVESTMENT OUTLOOK (Slow-paced but still positive)
56
65
73 73 72 72
69 67
61
3 3
44 35
27 26 25
28 28
33 39
0
20
40
60
80
100
120
Dec-13 Jun-14 Dec-14 Jun-15 Dec-15 Jun-16 Dec-16 Jun-17 Dec-17
% of Firms
Increase Decrease No Change
79 82 79 78 86 84
80 72 73
1
0
20 18 21 22
14 15 20 28
26
0
20
40
60
80
100
120
Dec-13 Jun-14 Dec-14 Jun-15 Dec-15 Jun-16 Dec-16 Jun-17 Dec-17
% of Firms
Increase Decrease No Change
Medium-term Investment Outlook (Plant & Machinery)
Medium-term Investment Outlook (Buildings)
VISITOR ARRIVALS Tourism Fiji target – $2.2b industry with 930,000 visitors by 2021
Sources: FBOS & Macroeconomic Committee
Visitor Arrivals (number of people)
Tourism Earnings
12.5% -3.5%
0
200
400
600
800
1,000
2010 2011 2012 2013 2014p 2015p 2016p 2017p 2018f 2019f 2020f
‘000s Annual Jan Oct-17 Forecast
5.0%
6.4%
5.0%
5.0% 2.7%
16.5%
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2012 2013 2014 2015p 2016p 2017f 2018f
F$M Annual Jan-Sept
-10.0%
10.0% 3.0%
As at 01 March, 2018 Source: RBF
COMMERCIAL BANKS’ OUTSTANDING LENDING & BANKS’ LIQUIDITY
5986 6489
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
F$M Outstanding Loans & Advances
5.65
2.0
4.0
6.0
8.0
10.0
12.0
14.0
%
568
0
100
200
300
400
500
600
700
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
F$M
Outstanding Lending Rate Outstanding Loans & Advance
Banks’ Liquidity
FINANCIAL SYSTEM IS SOUND
19319
16637
0
2000
4000
6000
8000
10000
12000
14000
16000
18000
20000
1980 1990 1995 2000 2005 2010 2015 2017
F$M Non Regulated Financial Entities
Regulated Financial Entities
Source: RBF
51.7
2.9 3.7
8.3
0.3
31.8
1.4
Commercial BanksLicensed Credit InstitutionsNBFIs
Insurance Companies
Total Gross Assets: $19.3 billion
LABOUR MARKET CONDITIONS
Source: RBF
0
50
100
150
200
250
2010 2011 2012 2013 2014 2015 2016 2017
F$M
-15,000
-5,000
5,000
15,000
25,000
2010 2011 2012 2013 2014 2015 2016 2017
No. New Compulsory Membership Compulsory Withdrawal
23 25 28 28 29 27 26 27 23
19 16
7.3 7.5 6.2
5.5 4.5
0
2
4
6
8
10
0
5
10
15
20
25
30
35
2005 2007 2009 (r) 2012(e) 2014(e) 2017
% `000s Unemployed Unemployment Rate
RBF Jobs Ads Survey PAYE Collections
FNPF Compulsory Membership and Withdrawals Unemployment has Declined
0
5,000
10,000
15,000
20,000
25,000
2001* 2003* 2005* 2007* 2009* 2011* 2013* 2015 2017
No.
*Job Ads – Fiji Times only from 2001-2014
Exports Imports
Sources: FBOS & Macroeconomic Committee
TRADE DEFICIT FINANCED BY TOURSIM AND REMITTANCES
8.4%
0
500
1,000
1,500
2,000
2,500
2010 2011 2012 2013 2014 2015p 2016p 2017f 2018f 2019f
F$M Annual Jan-Nov
-5.5%
7.3% 6.2% 4.1%
Tourism Earnings
0.3%
0
1,000
2,000
3,000
4,000
5,000
6,000
2010 2011 2012 2013 2014 2015p 2016p 2017f 2018f 2019f
F$M Annual Jan-Nov
3.0%
3.8%
5.6% 5.2%
16.5%
0
300
600
900
1,200
1,500
1,800
2012 2013 2014 2015p 2016p 2017f 2018f
F$M Annual Jan-Sept
-10.0%
10.0% 3.0%
2.7%
-3.9% 17.9%
0
200
400
600
2010 2011 2012 2013 2014 2015 2016 2017 2018
F$M Annual Jan
-1.6%
Personal Remittances
Source: National Budget Supplement 2017-2018
IMPROVEMENT IN THE EXPENDITURE MIX
3857.3
0.0
500.0
1000.0
1500.0
2000.0
2500.0
3000.0
3500.0
4000.0
4500.0
F$M
Revenue
4356.8
0.0
500.0
1000.0
1500.0
2000.0
2500.0
3000.0
3500.0
4000.0
4500.0
F$M
Expenditure
66
59
34
41
0
10
20
30
40
50
60
70
80
90
100
% Operating Capital
Expenditure Mix
*Revenue for FY2017-18 includes asset sales.
Source: National Budget Supplement 2017-2018
-4.9
-6.0
5.0
-0.3
-3.4
-6.2
-5.3 -5.8
-3.1 -3.3 -2.9
-1.8
0.5
-4.1
-2.2 -1.4
-1.1 -0.5
-4.2 -4.1
-2.2
-4.5
-3.0 -2.5
-8.0
-6.0
-4.0
-2.0
0.0
2.0
4.0
6.0
1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 16/17(p) 18/19(t)
%
Average 12 years -3.1 Average 13 years -2.4
Net Deficit (Percent of Calendar & Fiscal year GDP)
EXPANSIONARY 2017/18 NATIONAL BUDGET
47.5
-
10
20
30
40
50
60
%
TOTAL GOVERNMENT DEBT
Sources: MOE & RBF * Excluding asset sales
Debt as a percent of GDP Debt as a percent of Revenue
External debt as a percent of Exports of Goods & Services External Debt Servicing as a percent of Exports
15.7 20.7 21.5 24.9 26.7 29.7 27.1 28.4
0
20
40
60
80
100
120%
0
50
100
150
200
250
%
1.6 1.8 1.5 1.6 1.7 1.8 4.1
2.2
-1
3
7
11
15%
GOVERNMENT DEBT IS SUSTAINABLE
Central Government Debt - 2016 (Debt US$ billions)
Source: 2017-2018 National Budget Supplement and International Monetary Fund
Central Government Debt - 2016 (Percent of GDP)
239.3
106.3
89.3
69.6
65.6
61.5
46.8
46.5
44.3
41.0
34.6
29.2
0 50 100 150 200 250 300
Japan
Advanced Economies
UK
India
Maldives
Mauritius
Emerging & Developing Economies
Fiji
China
Australia
Papua New Guinea
New Zealand
% of GDP
Economies
0
50
100
150
200
250
300
350
400
450
500
Fiji Maldives PNG Mauritius New Zealand Australia
% CHANGE IN VALUE OF FJD
AUD NZD JPY USD EUR
30-November-2017 0.6343 0.6972 53.74 0.4804 0.4051
MONTHLY % CHANGE 1.2 -0.5 -1.5 -0.3 -2.1
ANNUAL % CHANGE -0.9 3.8 -0.1 0.3 -10.0
% CHANGE FROM 31 DEC 15
TO 30 NOVEMBER 2017 -1.8 1.4
-5.2
2.2 -5.9
% CHANGE FROM DEV (APR
2009) TO NOVEMBER 2017 0.9 -10.8 19.3 5.4 18.0
Sources: RBF and FBOS
MONETARY POLICY OBJECTIVES ARE INTACT
1.5
-2.0
0.0
2.0
4.0
6.0
8.0
10.0
%
Headline Inflation
Headline Inflation – January Foreign Reserves Remain Comfortable
*Others include Health, Communication. Furnishings, Hhld., Equip. Routine Hhld. maintenance, Recreation & Culture, Clothing & Footwear and Misc.
2160
5.5 4.9
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
0
500
1,000
1,500
2,000
2,500MORI F$M
Retained Imports Cover
RIS
KS
Natural disasters & adverse weather
conditions
Surge in commodity prices
Global geo-political tensions
Increase protectionism by key advanced economies
BUT RISKS REMAIN
SUMMARY
Global economic prospects remain firm;
Domestically, the economy is forecast to grow for the 9th consecutive year in 2018;
Partial indicators of consumption and investment are positive;
Financial conditions are conducive for growth;
Labour market expectations are favourable;
Trade deficit remains large but sustainable;
Fiscal and monetary policy are supportive of growth;
Outlook for business confidence is positive;
Inflation is expected to remain below 3.0 percent; and
Foreign reserves are currently comfortable and expected to remain adequate in 2018.
THANK YOU
