Numbers & Statistics

IMF Executive Board Concludes 2019 Article IV Consultation with Fiji

By  | 

Via IMF (Den Internationale Valutafond)

IMF Executive Board Concludes 2019 Article IV Consultation with Fiji







March 20, 2020











  • Economic activity slowed sharply in 2019 due to lower government spending, tighter domestic financial conditions, weak sentiment, and the synchronized global downswing.
  • Growth is estimated to have reached about 1 percent in 2019, underpinned by resilient tourism and remittances.
  • The impact of COVID-19 on Fiji’s GDP growth was not assessed in this report which was finalized in January. But the economy should pick up gradually as the private sector regains dynamism. Inflation pressures are subdued.

WASHINGTON, DC
March 20, 2020 the Executive Board of the International
Monetary Fund (IMF) concluded the Article IV consultation

[1]

with Fiji.

The Fijian economy experienced relatively high growth during 2017-18 amid
rising external and fiscal imbalances. Fiscal space is now at risk and
external vulnerabilities remain significant. Economic activity slowed
sharply in 2019 due to lower government spending, tighter domestic
financial conditions, weak sentiment, and the synchronized global
downswing. Growth is estimated to have reached about 1 percent in 2019,
underpinned by resilient tourism and remittances. GDP growth should pick up
gradually as the private sector regains dynamism. Inflation pressures are
subdued.

Policies should aim to sustain growth and make it more inclusive as fiscal
policy support is withdrawn, and external imbalances narrow. Reducing
fiscal imbalances is essential to rebuild buffers to respond to natural
disasters and to maintain public debt sustainable. Fiscal consolidation
should focus on reining in current spending given limited scope for further
revenue mobilization and the need for capital spending to improve
resilience to climate change. Improvements in the business environment and
in governance are essential to raise potential growth and needed private
investment, and to enhance productivity and competitiveness. Another
priority should be to tackle the gender gap in labor force participation in
order to boost potential growth and make it more inclusive.

Executive Board Assessment

[2]

Executive Directors welcomed the recent pickup in activity after a sharp
slowdown in 2019. Directors noted that the medium-term growth outlook is
favorable but subject to significant risks, including rising fiscal and
external imbalances, and natural disasters. They emphasized the need to
consolidate the fiscal position, boost potential growth, and build
resilience to weather-related shocks.

Directors stressed the importance of growth-friendly fiscal consolidation
to rebuild buffers and ensure debt sustainability. In this context, they
encouraged the authorities to rationalize current spending and protect
priority investments and social programs. They agreed that a credible
medium-term fiscal strategy would help underpin the consolidation efforts
and place the debt-to-GDP ratio firmly on a downward path.

Directors noted that the stance of monetary policy is appropriate and
should continue to focus on maintaining adequate foreign reserves. They
agreed that the central bank should continue to rely on the automatic
stabilizing mechanism of the peg, avoid financing the government, and
strengthen its operational independence. Directors also encouraged the
authorities to gradually relax the remaining exchange restrictions, with
technical support from the Fund.

Directors underscored the need to safeguard financial stability, including
by upgrading the supervision of nonbank financial institutions, adopting
the Credit Union Act, and closely monitoring nonperforming loans. They
looked forward to further progress in strengthening the AML/CFT framework
in line with the recommendations of the FATF.

Directors welcomed the authorities’ structural reform initiatives. They
encouraged sustained efforts to improve the business environment, foster
private sector investment, and strengthen governance. Directors recommended
reforms to improve the functioning of the labor and product markets,
including measures to boost female labor force participation and
rationalize price controls. They also highlighted the importance of
aligning the investment regime with international best practices and
upgrading the disaster risk management framework.



Table 1. Fiji: Selected Economic Indicators, 2015–20

Quota: SDR 98.4 million

GDP per capita (2018): US$6,208

Nominal GDP (2018): US$5.5 billion

2015

2016

2017

2018

2019

2020

Proj.

Output and prices (percent change)

Real GDP

4.7

2.5

5.4

3.5

1.0

1.8

GDP deflator

3.7

5.8

0.7

3.0

2.4

2.5

Consumer prices (average)

1.4

3.9

3.4

4.1

1.9

2.0


Central government budget (percent of GDP)

Revenue

26.0

26.1

27.6

27.1

25.4

25.7

Expenditure

29.8

27.4

29.4

32.6

30.3

30.2

Fiscal balance

-3.8

-1.3

-1.8

-5.5

-4.9

-4.5

Public debt

43.0

44.0

43.7

46.2

47.8

50.3

Money and credit (percent change)

Net domestic credit depository corporations

13.4

7.6

5.9

9.7

Private sector credit

14.2

12.9

13.9

14.9

7.0

6.0

Broad money (M3)

13.9

4.8

8.2

2.7

Monetary base

8.4

0.5

18.4

-9.9

Central Bank Policy rate

0.5

0.5

0.5

0.0

Commercial banks deposits rate

2.7

3.0

3.2

3.4

Commercial banks’ lending rate

5.9

5.8

5.6

5.7

External sector (in percent of GDP)

Trade balance

-19.5

-20.2

-20.4

-24.4

-21.5

-21.8

Services (net)

16.0

16.3

15.5

16.7

17.0

17.1

Primary Income (net)

-6.1

-5.5

-7.9

-6.5

-8.2

-7.6

Secondary Income (net)

6.1

5.8

6.1

5.7

5.5

5.4

Current account balance

-3.5

-3.6

-6.7

-8.5

-7.2

-6.9

Capital account balance

0.1

0.1

0.1

0.1

0.1

0.1

Financial account balance

-3.2

-6.2

-9.5

-12.1

-8.6

-7.4

Of which: FDI (net)

-5.1

-8.2

-7.2

-8.6

-7.6

-6.2

Of which: Portfolio investment (net)

1.9

0.6

0.8

0.6

0.3

2.2

Of which: Other investment (net)

0.0

1.4

-3.0

-4.2

-1.4

-3.3

Errors and omissions

1.6

-2.6

0.3

-6.0

0.0

0.0

Change in reserve assets

1.4

0.1

3.1

-2.3

1.5

0.5

Gross official reserves (in millions of U.S. dollars)

921

915

1,103

940

1,008

1,038

(In months of retained imports)

5.6

5.3

5.7

4.4

5.0

4.8

External central government debt (In percent of GDP)

12.7

13.1

12.6

12.6

13.1

13.7

Miscellaneous

Output gap

1.3

0.5

2.5

2.8

0.7

-0.5

Real effective exchange rate (average)

105.5

110.1

111.9

112.7

Exchange rate (Fiji dollars per U.S. dollar; period
average)

2.10

2.09

2.07

2.09

GDP at current market prices (in millions of U.S. dollars)

4,682

4,930

5,353

5,537

5,526

5,766

GDP per capita (in U.S. dollars)

5,386

5,621

6,050

6,223

6,176

6,409

GDP at current market prices (in millions of Fiji dollars)

9,822

10,327

11,065

11,557

11,951

12,470

Sources: RBF, Ministry of Economy and IMF staff estimates
and projections.




[1]

Under Article IV of the IMF’s Articles of Agreement, the IMF holds
bilateral discussions with members, usually every year. A staff
team visits the country, collects economic and financial
information, and discusses with officials the country’s economic
developments and policies. On return to headquarters, the staff
prepares a report, which forms the basis for discussion by the
Executive Board.


[2]

At the conclusion of the discussion, the Managing Director, as
Chairman of the Board, summarizes the views of Executive Directors,
and this summary is transmitted to the country’s authorities. An
explanation of any qualifiers used in summings up can be found
here:

http://www.IMF.org/external/np/sec/misc/qualifiers.htm

.


IMF Communications Department
MEDIA RELATIONS

PRESS OFFICER: Brian Walker

Phone: +1 202 623-7100Email: MEDIA@IMF.org

@IMFSpokesperson








Print Friendly, PDF & Email

Hold dit netværk orienteret

READ ALSO  IMF Executive Board Concludes 2020 Article IV Consultation with Belgium