Fiji has officially entered a phase of deflation, as indicated by a notable drop in the annual headline inflation rate to -3.8 percent in September, marking the lowest level in several years. The Reserve Bank of Fiji (RBF) has attributed this significant decline primarily to budget measures introduced in August, which have successfully reduced the prices of essential goods and services, including food, non-alcoholic beverages, transportation, and fuel.
RBF Governor and Board Chairman Ariff Ali confirmed that the central bank’s Overnight Policy Rate (OPR) remains unchanged at a historic low of 0.25 percent. This decision reflects the bank’s ongoing commitment to fostering economic growth while ensuring both price and financial stability. Ali expressed confidence in the effectiveness of the RBF’s monetary policy objectives, which aim to maintain price stability and an ample level of foreign reserves.
Despite the lower cost of living, some prices have increased, particularly in the alcohol, tobacco, restaurant, and hotel sectors. Nevertheless, Fiji’s foreign reserves remain robust at approximately $3.9 billion, sufficient to cover 6.1 months of retained imports. This financial buffer signifies a resilient economy, bolstered by steady consumption, investment, and business confidence.
Ali noted that consumer activity remains strong, propelled by higher incomes and incoming remittances. He remarked that businesses are optimistic, expecting stable conditions over the next six to twelve months. However, the RBF has also highlighted potential challenges to growth, including global uncertainties such as trade tensions between the United States and China and potential disruptions caused by the impending cyclone season.
To safeguard economic stability, the RBF will continue to monitor both domestic and international developments closely and adjust monetary policies as necessary. The bank’s accommodative stance helps keep lending rates low, supporting a significant private sector credit growth of 9.6 percent in September, with system liquidity steady at about $2.3 billion.
Overall, Fiji’s current economic trajectory, fueled by deflation and an increase in consumer spending, highlights the resilience of its economy. As government measures and strategic policies contribute to maintaining a positive outlook, the focus on stability suggests a hopeful path ahead for the Fijian economy.
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