The Reserve Bank of Fiji (RBF) said on Thursday that the Fijian economy is anticipated to contract severely this year with sector performances significantly weak to date due to the implication of COVID-19.
According to a RBF statement, the Fijian central bank Governor Ariff Ali said that recent partial indicators for consumption and investment continue to point to falling aggregate demand while overall labour market conditions have worsened with continuous job losses.
Given the weak economy in Fiji, domestic credit has slowed further and the number of non-performing loans has risen, he said, adding that the financial system continues to be assessed as sound, underpinned by solid capitalization and liquidity ratios.
Commercial banks’cost of funds has generally fallen owing to the high levels of excess liquidity which totalled 796.9 million Fijian dollars (about 365.9 million U.S. dollars) as at June 24.
In addition, the easing of some COVID-19 restrictions by the Fijian government will see the restart of some economic activity.
Annual inflation remained in negative territory in May (-1.7 percent) and is forecast to edge up to 1.0 percent by year-end. Foreign reserves are around 2,203.9 million Fijian dollars (about 1,011.8 million U.S. dollars) sufficient to cover 6.9 months of retained imports and are expected to remain comfortable in the medium-term.
The unveiling of the national budget in July could catalyze economic activity further and that RBF will maintain its current accommodative stance given the stable outlook for foreign reserves and inflation.