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Fiji’s inflation rate drops to 4.3pc, Private sector credit growth picks up

Fiji's inflation rate fell to 4.3 per cent in August from the 4.7 per cent in July; although still higher than 1.9 per cent recorded in the same period last year.

According to the recent Economic Review for the month ended September 2018 released by the Reserve Bank of Fiji (RBF, higher prices were noted for yaqona, alcoholic drinks & tobacco, vegetables and fuel items.

Inflation is the rate at which the general level of prices for goods and services rise and consequently the purchasing power of a currency falls.

This means as inflation rises, it decreases the amount of goods that your money can buy and decreases its purchasing power.

The high fuel prices could be attributed to its increase in July after a review by the by the Fijian Competition and Consumer Commission (FCCC) in line with the movements of world market prices.

The fuel prices from July 15, 2018 to October 14, 2018 are mainly determined by the movement in the international prices for Petroleum and LPG products since the last quarter.

FCCC is expected to conduct the next fuel and LPG price review on October 15, 2018.

The recent natural disasters experienced earlier this year were also expected to raise prices of agricultural market items such as vegetables and root crops.

But the price increase was anticipated to generally subside within the year when supply normalises.

The high alcohol and tobacco prices could also be attributed to a 15 per cent price increase as announced in the 2018/2019 National Budget.

The central bank also forecasts inflation to remain elevated until year-end, led by increased duty on alcohol, tobacco, sweetened drinks and higher fuel prices.

Fiji’s foreign reserves level increased further in August to $2.18 billion (US$1.08 billion), sufficient to cover 5.0 months of retained imports of goods and non-factor services (MORI).

As at October 2, 2018, foreign reserves were noted at $2.11b (US$991 million), sufficient to cover 4.9 months of imports.

Meanwhile, after continued slowdown since the beginning of the year, Fiji’s private sector credit growth expanded by a stronger 7.9 per cent over the month of August.

According to the Economic Review for the month ended September 2018 released by the Reserve Bank of Fiji (RBF), the credit growth was led by a rise in commercial bank lending to private sector business entities.

The central also noted that the banking sector liquidity measured by banks’ demand deposits (BDD) rose over the month underpinned by the increase in foreign reserves.

Liquidity, simply put, are excess funds that our commercial banks have at the end of each day that have not been lent out to borrowers.

These funds are deposited by commercial banks with the RBF and do not accumulate any interest. With Fiji’s economy being mainly driven by consumption, the level of liquidity in the banking system has a bearing on the level of consumption and investment activities in the economy.

The build-up in liquidity may signal positive support for commercial banks in their issuance of loans.

It can also mean that commercial banks have a significant amount of loans that have been approved, but are not fully drawn/utilised.

As at September 28, 2018, BDD remained adequate at $418.2 million (US$196 million).

Looking the currency movements in August, the Fiji dollar (FJD) appreciated against the New Zealand (1.4%), and the Australian (0.8%) dollars but depreciated against the Yen (-1.2%), the USD (-1.1%) and the Euro (-0.9%).

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