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FIJI: MACROECONOMIC HISTORY 2006-current

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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  1. FIJI: MACROECONOMIC HISTORY2006-current Reserve Bank of Fiji PFTAC Workshop, Samoa November 2011

  2. 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.

  3. 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

  4. OUTPUT GAP

  5. CREDIT GROWTH & LIQUIDITY

  6. IMPORTS & FOREIGN RESERVES FNPF Recall in 2006 : F$300m

  7. MONETARY CONDITIONS

  8. MONETARY CONDITIONS

  9. MONETARY CONDITIONS

  10. MONETARY CONDITIONS

  11. 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

  12. CREDIT GROWTH & LIQUIDITY

  13. MONETARY CONDITIONS Underpinned largely by machinery, transport & equipment,mineral fuel & manufactured goods

  14. MONETARY CONDITIONS

  15. MONETARY CONDITIONS

  16. 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

  17. INFLATION

  18. EXTERNAL SUSTAINABILITY CAB deteriorated further, after some adjustment in 2007…

  19. EXTERNAL SUSTAINABILITY

  20. DOMESTIC DEMAND Despite the rebound in Q2, import volume was relatively flat…

  21. DOMESTIC DEMAND

  22. DOMESTIC DEMAND Monetary conditions was relatively easy in 2008…

  23. EXTERNAL SUSTAINABILITY

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

  25. EXTERNAL SUSTAINABILITY Rapid drawdown in foreign reserves…

  26. 2009 Global financial crisis and the devaluation Very weak domestic demand Tight monetary conditions High prices

  27. EXTERNAL SUSTAINABILITY

  28. EXTERNAL SUSTAINABILITY

  29. EXTERNAL SUSTAINABILITY Substantial improvement in CAB

  30. DOMESTIC DEMAND Demand collapses in the first 3 quarters but recover in the last quarter…

  31. DOMESTIC DEMAND

  32. INFLATION

  33. MONETARY CONDITIONS Tight monetary conditions…

  34. EXTERNAL SUSTAINABILITY

  35. 2010 - CURRENT Resurgence in oil & food prices + domestic structural changes (Electricity tariff and VAT) Stagnant potential output level Weak demand High prices

  36. DOMESTIC PRODUCTION Potential output stagnant after 2005…

  37. DOMESTIC DEMAND

  38. DOMESTIC DEMAND

  39. INFLATION

  40. EXTERNAL SUSTAINABILITY CA sustainability still a worry..

  41. EXTERNAL SUSTAINABILITY Foreign reserves moves around 4months cover..

  42. END THANK YOU

  43. DOMESTIC DEMAND

  44. DOMESTIC DEMAND

  45. DEVALUATION

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

  47. DOMESTIC DEMAND Swift adjustment in the output gap after Q2 2009..

  48. INFLATION

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

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