ANZ ECONOMIST TO FIJI: INVESTORS NEED CLEAR POLICIES

SUVA, Fiji (Fiji Daily Post, Mar 28) –Investors in Fiji need to know how the interim administration plans to rescue the local economy before they will decide to invest in Fiji, an economist said in Suva yesterday.

ANZ senior international economist, Jasmine Robinson, told economists and business people that investors need to see some guidelines as to how the economy would come out of the current weak position. Robinson delivered a presentation on the economic outlook for Fiji and the currency markets at an ANZ Business Breakfast at the Holiday Inn.

She suggested that the Interim Government needs to have greater clarity in its macroeconomic policy and investment direction that would assist foreign investors as they look into investing here.

"We understand that the economy is slowing, that’s fine, but we need to see some direction in terms of reforming various industries and trying to bring external balances to more manageable levels," she said.

Robinson says further reform is needed across the board and investments need to be stepped up in order for economic activity to gain momentum and sustain a faster pace of growth that would lift per capita income levels over the medium term.

She pointed out that Fiji’s economic growth had averaged around 2.5 per cent since 2000, slightly ahead of its 10 year average of 2.1 per cent.

"Growth has been assisted by accommodative fiscal and monetary policies," she said.

In 2006, the economy, riding on the good returns from the construction, transport, communication and tourism related sectors, picked up to around 3 per cent.

Robinson said the Reserve Bank of Fiji (RBF) had forecast the economy to decline by around 2 to 2.5 per cent this year.

However, she expects a modest pick up in the economy in 2008 from 1 to 1.5 per cent led by a recovery in the tourist related sector.

"Scope for a reversal of current tightening stance in monetary policy is limited given that credit growth is still high although there are some signs that growth is moderating. We expect some improvement in the current account deficit position as tourism receipts recover and import demand eases but this still remains quite high," she said.

She highlighted the challenges the local economy faced in terms of the export sector and fiscal management. She also pointed to the prospect of a recovery in economic conditions in 2008, driven by the tourism industry.

Robinson said although faced with initial set-backs at the start, the tourism industry should be picking up again and this would rub off on sectors like construction and transport.

Challenges facing the top two exports, sugar and garment, are expected to continue over the next year. This included the competition from Asian garment manufacturers.

"Competition from Asian garment manufacturers will continue to remain strong while servicing niche market demand will present strong opportunities for Fiji garment exporters, the overall business environment will remain highly competitive," she said.

The sugar industry restructuring will need to feature more prominently over the next few years as the industry adjusts to a reduction in European Union sugar preferences with the mining sector also facing a decline in output.

Robinson said that the foreign reserve levels have stabilised and the government bond issue over November last year would help support reserves position.

But she added that there needs to be a slowdown in credit growth ad import demand, which in turn would help relieve the pressure in terms of import cover against official reserves.

Import cover is currently around 3.3 months of imports compared to 4 months at the end of 2005.

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