Economic activity supports growth outlook
The domestic growth outlook for this year of 4.3 percent is being supported by the improved sectoral outcomes and buoyant demand conditions to date, according to Reserve Bank’s June 2015 Quarterly Economic Review released today. On the sectoral front, the commencement of the sugar crushing season, together with positive performances from the electricity, timber, mining […]
September 17, 2015 9:34 pm
The domestic growth outlook for this year of 4.3 percent is being supported by the improved sectoral outcomes and buoyant demand conditions to date, according to Reserve Bank’s June 2015 Quarterly Economic Review released today.
On the sectoral front, the commencement of the sugar crushing season, together with positive performances from the electricity, timber, mining and tourism industries continue to support economic activity.
Sugar: As at 9 August 2015, a total of 638,726 tonnes of crushed cane yielded 74,131 tonnes of sugar. This year cane and sugar production levels are forecast to be around 2.0 million tonnes and 245,460 tonnes, respectively.
Electricity: Electricity production by the Fiji Electricity Authority rose annually by 2.2 percent to 383,164 megawatt hours (MWh) in the year to May. Approximately, 58.3 percent of total electricity was produced from renewable sources while the remainder was produced by non-renewable sources. The industrial production index for electricity also noted an annual increase of 3.4 percent in the first quarter of 2015. Over the same period, electricity
consumption rose by 5.0 percent to 355,783 MWh underpinned by higher demandfromcommercial (8.3%), domestic (3.9%),industrial (0.3%) and other (8.2%) customers.
Timber: The performance of the timber industry was mixed up to June. Cumulative to May, woodchip production by Tropik Wood Industries Limited rose by 6.3 percent over the year to 144,947 metric tonnes, boosted by higher production by the Wairiki chip mill (62.4%). In contrast, mahogany production by the Fiji Hardwood Corporation Limited, in the year to June, fell by 9.5 percent to 19,666 cubic metres. This was attributed to the wet weather conditions.
Gold: Higher volumes of ore extraction in the first half of the year resulted in increased gold production by the Vatukoula Gold Mines Limited (VGML). Production by the VGML rose by 26.7 percent to 20,637 ounces (Graph 8). As of 30 June 2015, the world market gold price was US$1,171 (FJ$2,447) per fine ounce.
Tourism: Cumulative to June, visitor arrivals rose by an annual 8.7 percent to 335,517 compared to a yearly increase of 4.0 percent in the same period in 2014. Australia and New Zealand continue to be the main tourism source markets for Fiji, accounting for 48.8 percent and 15.4 percent of total arrivals, respectively. Other key markets include the US (9.7%), Pacific Island countries (7.0%), China (5.5%), Continental Europe (4.6%), and the United Kingdom (2.5%). In 2015, visitor arrivals are anticipated to increase by 5.0 percent.
Aggregate demand remains strong with upbeat consumption and investment activity during the review period which is expected to strengthen further in the second half of the year.
Consumer Spending: Consumer spending remained upbeat in the June quarter. Net Value Added Tax collections rose by 9.1 percent in the year to June to $403.8 million. New and second-hand vehicle registrations, an indicator for high-end consumer spending, rose in the year to May by 5.1 percent and 41.9 percent, respectively. New commercial bank lending for consumption purposes increased by 14.4 percent (to $361.7m) cumulative to June compared to a 28.0 percent increase in the same period in 2014. Generally, consumption activity in the year to June has been supported by higher inward remittances which rose by 29.3 percent to $230.4 million and the growth in individual incomes, as indicated by higher(12.5%) Pay As You Earn collections. Moreover, the wholesale and retail trade survey indicated that in the first quarter of this year, sales and services turnover rose annually by 5.2 percent to $889.6 million.
Construction: Domestic cement sales, a direct input for construction work, rose by an annual 42.1 percent (to 79,376 tonnes) in the year to June. The total value of work put-in-place by the construction sector increased by an annual 8.4 percent to $110.5 million in the first quarter of 2015. This was mainly underpinned by higher private sector (7.1%) and public sector (10.2%) activities. Similarly, a total of 119 completion certificates with a value of $21.1 million were issued in the same period. While the number of completion certificates issued declined annually by 20.7 percent, the value of projects completed increased by 39.0 percent, reflecting the completion of higher valued projects. The number and value of building permits issued, an indicator that gauges the future supply of buildings, rose by an annual 0.6 percent and 3.0 percent, respectively in the first quarter of 2015.
Investment: Cumulative to June, new lending for investment purposes rose annually by 82.1 percent to $242.8 million, on account of the significant growth in new loans to the building & construction (by $61.1m to $112.1m) and the real estate (by $48.3m to $130.7m) sectors. In 2015, investment activity is expected to be around 26 percent of GDP, a third consecutive year of investment level above 25 percent of GDP.
Labour Market: Conditions in the labour market remained favourable until the second quarter, reflected by the RBF’s Job Advertisement Survey results. The number of vacant positions advertised rose by an annual 16.1 percent cumulative to June (Graph 10). Higher recruitment intentions were underpinned by the agriculture,
forestry & fishing; construction; finance, insurance, real estate and business services; mining & quarrying; wholesale & retail & restaurants & hotels and the community, social & personal services sectors.
Inflation: Inflation slowed to 0.8 percent in June from 2.4 percent in March (Graph 11).The out turn was mostly due to the lower contributions from the food & on alcoholic beverages and alcoholic beverages, tobacco & narcotics categories. In addition, due to the reduction in domestic fuel prices in April, the transport and housing, water, electricity, gas & other fuels categories continued to contribute negatively to inflation in the second quarter.
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