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Fiji: Country Economic Forecast: 26 Jul 2013

4 Pages Oxford Economics July 26, 2013 SKU: OFE5088377

Fiji’s GDP grew by an estimated 2.5% in 2012, which was much stronger than expected. The increase was underpinned by strong domestic demand, despite the adverse impact of natural disasters on key sectors such as agriculture. Looking ahead, we expect the economy to expand by 2% this year, driven by tourism, higher public capital expenditure and relaxed monetary policy. Inflation accelerated to around 3% in 2013Q1 from 1.5% at end-2012 due to supply disruptions caused by Cyclone Evan. Although it eased to less than 2% in April and May, we expect it to pick up in the coming months (and average 2.7% this year) as increases in capital spending push up overall demand and put upward pressure on prices. The government is loosening fiscal policy this year, with higher spending on infrastructure (including on roads and water supply & sanitation). As a result, we expect the budget deficit to widen to 3.2% of GDP in 2013, from an estimated 1.6% of GDP last year. This is slightly higher than the government’s estimate due to our less optimistic forecast for growth. Fiji’s imports are expected to increase substantially this year as the national airline buys three new aircraft to improve fuel efficiency, cargo capacity and, eventually, profitability. This is likely to cause a significant, albeit temporary, widening in the current account deficit this year – to more than 21% of GDP, double the 2012 level.

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Fiji: Country Economic Forecast: 26 Jul 2013

Oxford Economics
July 26, 2013

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