Fiji’s annual inflation rate rose from 5.8 percent in May to 6.7 percent in June and is projected to stabilize around 4 to 5 percent by the end of the year.
The Reserve Bank of Fiji (RBF) attributed the inflation increase to higher prices in categories such as food and non-alcoholic beverages, alcoholic beverages, tobacco and narcotics, transport, housing utilities, and restaurants.
In a statement, the RBF noted that inflation is expected to moderate from this month as the impact of the VAT increase reduces in effect.
RBF Governor and Chair Ariff Ali highlighted that the Fijian economy has been driven mainly by consumption activity, supported by higher tourist demand, personal remittances, and improved disposable incomes due to current tight labor market conditions.
Ali mentioned that while investment activity has been slow, recent indicators suggest a gradual improvement.
Looking ahead, Ali stated that the initiatives announced in the fiscal year 2024-25 National Budget are expected to stimulate economic activity.
He also noted that the tourism sector maintained its positive momentum through its peak season in June.
Visitor arrivals in the first half of the year increased by 7 percent to 447,155, propelled by more tourists from New Zealand, the United States, China, Australia, and the Pacific Island Countries.
In terms of sectoral performance, annual gains were seen in gold and electricity output, whereas timber and mineral water production remained subdued for the year up to June.
Ali pointed out that the financial sector remains conducive to growth, with low interest rates supporting private sector credit growth, which accelerated to 11.3 percent in June, the highest since July 2017 when it was 15.6 percent.
As of last week, foreign reserves stood at $3.5 billion, sufficient to cover 5.8 months of retained imports of goods and services, and are expected to remain adequate over the medium term.
Ali indicated that after considering the current economic conditions and risks, the medium-term outlook for inflation and foreign reserves remains stable.
The current monetary policy setting will be maintained to support economic growth.