1. FIJI: MACROECONOMIC HISTORY 2006-CURRENT Reserve Bank of Fiji PFTAC Workshop, Samoa November 2011

2. Buoyant domestic demand, drain on foreign reserves, widening trade deficit Fairly strong demand conditions (Positive output gap, acceleration in Private Sector Credit Growth, Increase in imports) Foreign reserves plummeted. Monetary policy tightened further. Credit ceiling adopted. 2006

3. Credit Ceiling (Dec 06 – Sep 09) Moral Suasion Capital Controls Use of Policy Indicator Rate (PIR) [RBF 91-day note] Open Market Operations [suspended from Jun 07 – Apr 10] Statutory Reserve Deposits Monetary Policy Tools :

4. OUTPUT GAP

5. CREDIT GROWTH & LIQUIDITY

6. IMPORTS & FOREIGN RESERVES FNPF Recall in 2006 : F$300m

7. MONETARY CONDITIONS

11. Continuation of credit ceiling Tighter monetary conditions led to decline in private sector credit growth Import demand fell Tightening of exchange control Foreign reserves improved Suspension of OMO and reduction of SRD ratio from 7% to 6% Improvement in current account balance 2007

12. CREDIT GROWTH & LIQUIDITY

13. MONETARY CONDITIONS Underpinned largely by machinery, transport & equipment,mineral fuel & manufactured goods

14. MONETARY CONDITIONS

16. Oil & Commodity price shocks High prices Recovery in domestic demand (easy monetary conditions + exchange rate appreciation) Deterioration in the current account balance and rapid drain in foreign reserves 2008

17. INFLATION

18. EXTERNAL SUSTAINABILITY CAB deteriorated further, after some adjustment in 2007…

19. EXTERNAL SUSTAINABILITY

20. DOMESTIC DEMAND Despite the rebound in Q2, import volume was relatively flat…

21. DOMESTIC DEMAND

22. Monetary conditions was relatively easy in 2008…

23. EXTERNAL SUSTAINABILITY

24. REER appreciates to a new normal, suggesting that on balance there was a competitiveness loss..

25. EXTERNAL SUSTAINABILITY Rapid drawdown in foreign reserves…

26. Global financial crisis and the devaluation Very weak domestic demand Tight monetary conditions High prices 2009

27. EXTERNAL SUSTAINABILITY

29. Substantial improvement in CAB

30. DOMESTIC DEMAND Demand collapses in the first 3 quarters but recover in the last quarter…

31. DOMESTIC DEMAND

32. INFLATION

33. MONETARY CONDITIONS Tight monetary conditions…

34. EXTERNAL SUSTAINABILITY

35. Resurgence in oil & food prices + domestic structural changes (Electricity tariff and VAT) Stagnant potential output level Weak demand High prices 2010 - CURRENT

36. DOMESTIC PRODUCTION Potential output stagnant after 2005…

37. DOMESTIC DEMAND

39. INFLATION

40. EXTERNAL SUSTAINABILITY CA sustainability still a worry..

41. EXTERNAL SUSTAINABILITY Foreign reserves moves around 4months cover..

42. END THANK YOU

43. DOMESTIC DEMAND

45. DEVALUATION

46. Immediate depreciation in the REER, representing a competitiveness boost..

47. DOMESTIC DEMAND Swift adjustment in the output gap after Q2 2009..

48. INFLATION

49. DOMESTIC DEMAND Output gap around negative territory in 2010 and expected to have moved into positive territory from Q2 2011..