Inflation to increase
26 February, 2021, 7:45 pm
PRICES of locally produced fruits and vegetables are projected to rise in the coming months as a result of supply shortages owing to Tropical Cyclone Ana and the associated floods.
The Reserve Bank of Fiji yesterday said while the annual inflation rate in January stood at -1.3 per cent, they were expecting an increase.
However it also noted that the increase was expected to be temporary and subside afterwards, resulting in the 2021 year-end inflation forecast being unchanged at 1.5 per cent.
The RBF Board held its meeting yesterday after which RBF governor and board chairman Ariff Ali said Fiji’s economy could contract further if borders did not open this year.
He did say that a marginal economic recovery could eventuate if borders opened towards the end of the year.
“On a positive note, the RBF’s December Business Expectations Survey shows that overall business confidence has improved slightly from six months ago, possibly reflecting the successful containment of the virus locally, businesses adjusting to the new norm and concrete steps towards immunisation across the globe,” said Mr Ali.
He said liquidity in the banking system remained sufficient at $902.7 million prompting the decline in banks’ cost of funds over the month.
“The financial sector is stable and banks have increased their provisioning allocation to account for potential loan defaults whilst extending the moratorium on a case-by-case basis.”
It was also highlighted that foreign reserves continued to be above adequate levels standing at $2,195.9m, sufficient to cover 6.8 months of retained imports of goods and services.
The outlook for foreign reserves for the near to medium term is also above the benchmark of 4.0 months of retained imports. The RBF board maintained the overnight policy rate (OPR) at 0.25 per cent.