Transcript Macroeconomic developments in Fiji

FIJI: MACROECONOMIC HISTORY
2006-CURRENT
Reserve Bank of Fiji
PFTAC Workshop, Samoa
November 2011
2006
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.
Monetary Policy Tools :
•
•
•
•
•
•
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
OUTPUT GAP
HPGAP_1600_RGDP
.020
.015
.010
.005
.000
-.005
-.010
I
II
III
2005
IV
I
II
III
2006
IV
CREDIT GROWTH & LIQUIDITY
%
PRIVATE SECTOR CREDIT GROWTH
F$M
40.0
140.0
35.0
120.0
30.0
EXCESS LIQUIDITY
100.0
25.0
80.0
20.0
60.0
15.0
40.0
10.0
20.0
5.0
0.0
0.0
PSC annual growth
Real PSC growth_annual
PSC quarterly growth
Excess Liquidity
IMPORTS & FOREIGN RESERVES
F$M
IMPORTS
FOREIGN RESERVES
F$M
2,700.0
800.0
2,600.0
700.0
600.0
2,500.0
500.0
2,400.0
400.0
2,300.0
300.0
2,200.0
200.0
2,100.0
2,000.0
2005
100.0
2006
2007
0.0
Jan-05
May-05
Sep-05
Jan-06
May-06
Sep-06
FNPF Recall in 2006 : F$300m
Jan-07
MONETARY CONDITIONS
%
12.00
10.00
NEW LENDING RATE
%
14.00
12.00
10.00
8.00
8.00
6.00
6.00
4.00
4.00
2.00
0.00
2.00
0.00
NEW TIME DEPOSIT RATE
MONETARY CONDITIONS
GOVERNMENT BOND YIELDS
%
16.00
%
14.00
14.00
T-BILLS RATE
12.00
12.00
10.00
10.00
8.00
8.00
6.00
6.00
4.00
4.00
2.00
2.00
0.00
0.00
Dec-05
Feb-06
3-year
Apr-06
5-year
Jun-06
Aug-06
10-year
Oct-06
Dec-06
15-year
28 - Day
91 - Day
MONETARY CONDITIONS
F$M
%
0.0
0.0
2005
2006
-200.0
-2.0
-4.0
-6.0
-400.0
-8.0
-9.3
-600.0
-10.0
-12.0
-800.0
-14.0
-16.0
-1000.0
-18.1
-1200.0
Current Account Balance
As % of GDP
-18.0
-20.0
MONETARY CONDITIONS
%
INFLATION
12.0
10.0
8.0
6.0
4.0
2.0
0.0
Dec-05
Jan-06
Feb-06
Mar-06
Apr-06
May-06
Jun-06
Jul-06
Aug-06
Sep-06
-2.0
-4.0
-6.0
Inflation_yoy
Inflation_qtrly
Oct-06
Nov-06
Dec-06
2007
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
CREDIT GROWTH & LIQUIDITY
%
PRIVATE SECTOR CREDIT GROWTH
30.0
F$M
EXCESS LIQUIDITY
400.0
350.0
25.0
300.0
20.0
250.0
15.0
200.0
150.0
10.0
100.0
5.0
50.0
0.0
0.0
PSC_annual growth
PSC_qtrly
EXCESS LIQUIDITY
MONETARY CONDITIONS
F$M
3,150.0
IMPORT PAYMENTS
F$M
900.0
800.0
3,100.0
700.0
3,050.0
600.0
3,000.0
500.0
2,950.0
400.0
2,900.0
300.0
2,850.0
200.0
2,800.0
100.0
2,750.0
2006
2007
Underpinned largely by machinery,
transport & equipment,mineral fuel &
manufactured goods
0.0
FOREIGN RESERVES
MONETARY CONDITIONS
F$M
%
0.0
0.0
2005
2006
2007
-200.0
-2.0
-4.0
-6.0
-400.0
-8.0
-600.0
-9.3
-10.0
-12.0
-800.0
-14.2
-14.0
-16.0
-1000.0
-18.1
-18.0
-1200.0
-20.0
Current Account Balance
As % of GDP
MONETARY CONDITIONS
INFLATION
%
12.0
10.0
8.0
6.0
4.0
2.0
0.0
Jan-07
Feb-07
Mar-07
Apr-07
May-07
Jun-07
Jul-07
Aug-07
Sep-07
-2.0
-4.0
-6.0
-8.0
Inflation_yoy
Inflation_annualised qtrly
Oct-07
Nov-07
Dec-07
2008
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
INFLATION
Fiji: CPI inflation, 2006-11 (Annualized q-o-q change)
20
Oil price peaks
at US$145 in
July 2008
15
10
5
0
Oil crosses
US$70 in
Apr-06
Food price
shock
Devaluation
Apr-09
Oil pass
US$80 in
Sep-10
VAT raised
to 15% in
Jan-11
-5
2006Q1
2006Q2
2006Q3
2006Q4
2007Q1
2007Q2
2007Q3
2007Q4
2008Q1
2008Q2
2008Q3
2008Q4
2009Q1
2009Q2
2009Q3
2009Q4
2010Q1
2010Q2
2010Q3
2010Q4
2011Q1
2011Q2
2011Q3
-10
EXTERNAL SUSTAINABILITY
Current account balance, 2005-10 (in percent of GDP)
0
2005
2006
2007
2008
2009
2010
-4
-8
-12
-8
-10
-11
-14
-16
-20
-19
-18
CAB deteriorated
further, after some
adjustment in
2007…
EXTERNAL SUSTAINABILITY
Fiji: Nominal exports and imports, 2005-10 (in percent of GDP)
80
70
70
60
54
50
40
28
30
22
20
10
0
2005
2006
2007
2008
2009
2010
DOMESTIC DEMAND
Fiji: Real import of goods, 2006-10 (in millions of fiji dollars)
1200
1000
800
600
400
Despite the
rebound in Q2,
import volume
was relatively
flat…
DOMESTIC DEMAND
Fiji: Real absorption, 2006-10 (in millions of fiji dollars)
1800
1700
1600
1500
1400
1300
1200
Absorption
recovered in Q2
and Q3, despite
record-high
food and oil
prices in 2008…
DOMESTIC DEMAND
Fiji: Private sector credit, 2006-10 (y-o-y percent change)
35
30
25
20
15
Ceiling on
private sector
credit, Dec-06
Monetary
conditions
was relatively
easy in 2008…
11.5
10
5
Post devaluation: weak recovery
-5
2006M1
2006M4
2006M7
2006M10
2007M1
2007M4
2007M7
2007M10
2008M1
2008M4
2008M7
2008M10
2009M1
2009M4
2009M7
2009M10
2010M1
2010M4
2010M7
2010M10
2011M1
2011M4
2011M7
0
EXTERNAL SUSTAINABILITY
Fiji: Exchange rate, 2006-11 (end of period)
1.1000
AUD per one FJD
NZD per one FJD
USD per one FJD
1.0000
0.9000
0.8000
0.7000
0.6000
0.5000
Sep-11
May-11
Jan-11
Sep-10
May-10
Jan-10
Sep-09
May-09
Jan-09
Sep-08
May-08
Jan-08
Sep-07
May-07
Jan-07
Sep-06
May-06
Jan-06
0.4000
EXTERNAL SUSTAINABILITY
Fiji: Real Effective Exchange Rate, 2006-11 (end of period)
120.0
110.0
REER
appreciates to a
new normal,
suggesting that
on balance
there was a
competitiveness
loss..
100.0
90.0
Sep-11
May-11
Jan-11
Sep-10
May-10
Jan-10
Sep-09
May-09
Jan-09
Sep-08
May-08
Jan-08
Sep-07
May-07
Jan-07
Sep-06
May-06
Jan-06
80.0
EXTERNAL SUSTAINABILITY
Foreign reserves, 2006-11 (in months of imports of goods & services)
4.5
4.0
3.5
3.0
Rapid
drawdown
in foreign
reserves…
2.5
2.0
1.5
Jan-06
Apr-06
Jul-06
Oct-06
Jan-07
Apr-07
Jul-07
Oct-07
Jan-08
Apr-08
Jul-08
Oct-08
Jan-09
Apr-09
Jul-09
Oct-09
Jan-10
Apr-10
Jul-10
Oct-10
Jan-11
Apr-11
Jul-11
1.0
2009
Global financial crisis and the devaluation
•
Very weak domestic demand
•
Tight monetary conditions
•
High prices
EXTERNAL SUSTAINABILITY
Fiji: Nominal exports and imports, 2005-10 (in percent of GDP)
80
70
70
60
51
50
40
28
30
23
20
10
0
2005
2006
2007
2008
2009
2010
EXTERNAL SUSTAINABILITY
Fiji: Real import of goods, 2006-10 (in percent of GDP)
100
90
80
70
60
50
40
Import
volume
tanked in
2009…
EXTERNAL SUSTAINABILITY
Current account balance, 2005-10 (in percent of GDP)
0
2005
2006
2007
2008
2009
2010
-4
-8
-12
-8
-10
-11
-16
-20
Substantial
improvement
in CAB
-14
-19
-18
DOMESTIC DEMAND
Fiji: Real absorption, 2006-10 (in millions of fiji dollars)
1800
1700
1600
1500
1400
1300
1200
Demand collapses
in the first 3
quarters but
recover in the last
quarter…
320
300
280
2006Q1
2006Q2
2006Q3
2006Q4
2007Q1
2007Q2
2007Q3
2007Q4
2008Q1
2008Q2
2008Q3
2008Q4
2009Q1
2009Q2
2009Q3
2009Q4
2010Q1
2010Q2
2010Q3
2010Q4
2011Q1
2011Q2
2011Q3
2011Q4
DOMESTIC DEMAND
Tourism Earnings_SA, 2006-11 (in millions of fiji dollars)
340
Tourism
earnings
rebound in
Q2 2009..
260
240
220
200
INFLATION
Fiji: CPI inflation, 2006-11 (Annualized q-o-q change)
20
Oil price peaks
at US$145 in
July 2008
15
10
5
0
Oil crosses
US$70 in
Apr-06
Food price
shock
Devaluation
Apr-09
Oil pass
US$80 in
Sep-10
VAT raised
to 15% in
Jan-11
-5
2006Q1
2006Q2
2006Q3
2006Q4
2007Q1
2007Q2
2007Q3
2007Q4
2008Q1
2008Q2
2008Q3
2008Q4
2009Q1
2009Q2
2009Q3
2009Q4
2010Q1
2010Q2
2010Q3
2010Q4
2011Q1
2011Q2
2011Q3
-10
MONETARY CONDITIONS
Fiji: Private sector credit, 2006-10 (y-o-y percent change)
35
30
25
20
Ceiling on
private sector
credit, Nov-06
Tight
monetary
conditions…
15
10
5
Post devaluation: weak recovery
0.2
-5
2006M1
2006M4
2006M7
2006M10
2007M1
2007M4
2007M7
2007M10
2008M1
2008M4
2008M7
2008M10
2009M1
2009M4
2009M7
2009M10
2010M1
2010M4
2010M7
2010M10
2011M1
2011M4
2011M7
0
EXTERNAL SUSTAINABILITY
Foreign reserves, 2006-11 (in months of imports of goods & services)
4.5
4.0
SDR allocation
in Aug&Sep of
SDR60 million
3.5
3.0
2.5
2.0
1.5
Devaluation
in Apr-09
Jan-06
Apr-06
Jul-06
Oct-06
Jan-07
Apr-07
Jul-07
Oct-07
Jan-08
Apr-08
Jul-08
Oct-08
Jan-09
Apr-09
Jul-09
Oct-09
Jan-10
Apr-10
Jul-10
Oct-10
Jan-11
Apr-11
Jul-11
1.0
2010 - CURRENT
Resurgence in oil & food prices + domestic
structural changes (Electricity tariff and VAT)
•
Stagnant potential output level
•
Weak demand
•
High prices
6.9
6.9
6.8
6.7
1994Q1
1994Q4
1995Q3
1996Q2
1997Q1
1997Q4
1998Q3
1999Q2
2000Q1
2000Q4
2001Q3
2002Q2
2003Q1
2003Q4
2004Q3
2005Q2
2006Q1
2006Q4
2007Q3
2008Q2
2009Q1
2009Q4
2010Q3
2011Q2
DOMESTIC PRODUCTION
Fiji: Potential Real GDP, 1994-2011
7.1
7.0
7.0
Potential output
stagnant after
2005…
6.8
log_Potential RGDP
log_RGDP
DOMESTIC DEMAND
Fiji: Real import of goods, 2006-10 (in percent of GDP)
100
90
80
70
60
50
40
Despite some
recovery in
2010, import
demand
remain weak…
5
-5
2006M1
2006M4
2006M7
2006M10
2007M1
2007M4
2007M7
2007M10
2008M1
2008M4
2008M7
2008M10
2009M1
2009M4
2009M7
2009M10
2010M1
2010M4
2010M7
2010M10
2011M1
2011M4
2011M7
DOMESTIC DEMAND
Fiji: Private sector credit, 2006-10 (y-o-y percent change)
35
30
25
20
15
10
Post devaluation: weak recovery
0
INFLATION
Fiji: CPI inflation, 2006-11 (Annualized q-o-q change)
20
Oil price peaks
at US$145 in
July 2008
15
10
5
0
Oil crosses
US$70 in
Apr-06
Food price
shock
Devaluation
Apr-09
Oil pass
US$80 in
Sep-10
VAT raised
to 15% in
Jan-11
-5
2006Q1
2006Q2
2006Q3
2006Q4
2007Q1
2007Q2
2007Q3
2007Q4
2008Q1
2008Q2
2008Q3
2008Q4
2009Q1
2009Q2
2009Q3
2009Q4
2010Q1
2010Q2
2010Q3
2010Q4
2011Q1
2011Q2
2011Q3
-10
EXTERNAL SUSTAINABILITY
Current account balance, 2005-10 (in percent of GDP)
0
2005
2006
2007
2008
2009
2010
-4
-8
-12
-8
-10
-11
-16
-20
CA sustainability
still a worry..
-14
-19
-18
EXTERNAL SUSTAINABILITY
Foreign reserves, 2006-11 (in months of imports of goods & services)
4.5
4.0
3.5
3.0
2.5
Foreign reserves moves
around 4months cover..
2.0
1.5
Jan-06
Apr-06
Jul-06
Oct-06
Jan-07
Apr-07
Jul-07
Oct-07
Jan-08
Apr-08
Jul-08
Oct-08
Jan-09
Apr-09
Jul-09
Oct-09
Jan-10
Apr-10
Jul-10
Oct-10
Jan-11
Apr-11
Jul-11
1.0
END
THANK YOU
DOMESTIC DEMAND
Fiji: Real import of goods, 2006-10 (in millions of fiji dollars)
1200
1000
800
600
400
4
3
2
1
0
-1
-2
-3
-4
-5
2006Q1
2006Q2
2006Q3
2006Q4
2007Q1
2007Q2
2007Q3
2007Q4
2008Q1
2008Q2
2008Q3
2008Q4
2009Q1
2009Q2
2009Q3
2009Q4
2010Q1
2010Q2
2010Q3
2010Q4
2011Q1
2011Q2
2011Q3
2011Q4
DOMESTIC DEMAND
Fiji: Output Gap, 2006-11 (in percent of GDP)
3.3
-0.6
HPGAP_NGDP
DEVALUATION
Fiji: Exchange rates, 2006-11 (end of period)
1.1000
NZD per one FJD
AUD per one FJD
USD per one FJD
1.0000
0.9000
0.8000
0.7000
0.6000
0.5000
Sep-11
May-11
Jan-11
Sep-10
May-10
Jan-10
Sep-09
May-09
Jan-09
Sep-08
May-08
Jan-08
Sep-07
May-07
Jan-07
Sep-06
May-06
Jan-06
0.4000
DEVALUATION
Fiji: Real Effective Exchange Rate, 2006-11 (end of period)
120
110
100
Immediate
depreciation in
the REER,
representing a
competitiveness
boost..
90
Jan-06
Apr-06
Jul-06
Oct-06
Jan-07
Apr-07
Jul-07
Oct-07
Jan-08
Apr-08
Jul-08
Oct-08
Jan-09
Apr-09
Jul-09
Oct-09
Jan-10
Apr-10
Jul-10
Oct-10
Jan-11
Apr-11
Jul-11
Oct-11
80
4
3
2
1
0
-1
-2
-3
-4
-5
2006Q1
2006Q2
2006Q3
2006Q4
2007Q1
2007Q2
2007Q3
2007Q4
2008Q1
2008Q2
2008Q3
2008Q4
2009Q1
2009Q2
2009Q3
2009Q4
2010Q1
2010Q2
2010Q3
2010Q4
2011Q1
2011Q2
2011Q3
2011Q4
DOMESTIC DEMAND
Fiji: Output Gap, 2006-11 (in percent of GDP)
Swift
adjustment in
the output
gap after
Q2 2009..
HPGAP_NG…
INFLATION
Fiji: CPI inflation, 2006-11 (y-o-y percent change)
12.0
10.0
Inflation peaks in Q1
before slowing until
Sep, where pressures
on inflation resumes…
10.3
9.4
8.0
6.0
VAT raised
to 15% in
Jan-11
4.0
2.0
Oil pass
US$80 in
Sep-10
2006Q1
2006Q2
2006Q3
2006Q4
2007Q1
2007Q2
2007Q3
2007Q4
2008Q1
2008Q2
2008Q3
2008Q4
2009Q1
2009Q2
2009Q3
2009Q4
2010Q1
2010Q2
2010Q3
2010Q4
2011Q1
2011Q2
2011Q3
2011Q4
0.0
DOMESTIC DEMAND
Fiji: Output Gap, 2006-11 (in percent of GDP)
HPGAP_NGDP
Output gap around
negative territory in 2010
and expected to have
moved into positive
territory from Q2 2011..
2006Q1
2006Q2
2006Q3
2006Q4
2007Q1
2007Q2
2007Q3
2007Q4
2008Q1
2008Q2
2008Q3
2008Q4
2009Q1
2009Q2
2009Q3
2009Q4
2010Q1
2010Q2
2010Q3
2010Q4
2011Q1
2011Q2
2011Q3
2011Q4
4
3
2
1
0
-1
-2
-3
-4
-5