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Fiji : Visitors arrivals, Inflation
Tourist arrivals declined by 2.1% relative to 2011, at least in part because of successive floods early in the year, with arrivals from Australia being down modestly (Figure 3.32.3). In December, f... light cancellations caused by the cyclone drove down departures to Fiji that month from Australia and New Zealand—the two main markets—by 11% and 16%, respectively, year on year. Given these late developments, the official 2012 GDP growth estimate is likely to be revised downward, particularly when flow-through effects on other sectors are fully taken into accountIn 2012, inflation ran at 4.3%—less than half of the rate in 2011 (Figure 3.32.4). Floods in January and March disrupted the supply of locally produced fruits and vegetables, fueling higher inflation early in the year. Inflation then fell gradually as commodity prices stabilized. Fiji’s net budget deficit in 2012, excluding principal repayments on loans, was estimated to be equivalent to 1.6% of GDP. This was larger than the 1.4% of GDP recorded in the previous year, but on-target expenditure and unexpectedly high revenue collections—particularly corporate taxes following the adoption of an advance tax payment system for companies—brought the deficit down to below the target of 1.9% of GDP. The central bank maintained an expansionary monetary policy, keeping its overnight policy rate at 0.5%, which it has maintained since October 2011. This contributed to low interest rates on loans and time deposits at commercial banks and kept liquidity high. In 2012, commercial banks’ outstanding loans increased by 7.6% year on year. The central bank also loosened exchange rate controls in response to rising foreign reserves. Nonetheless, at the end of 2012, foreign reserves totaled $922 million, sufficient to cover 5.2 months of imports, up from 5.0 months in December 2011. The 2013 budget reports Fiji’s current account deficit as narrowing to 6.1% of GDP in 2012 from 7.0% in 2011. However, the actual current account deficit may widen because of a higher trade deficit late in the year reflecting lower sugar and gold export earnings, as well as lower tourism receipts. Merchandise exports, including re-exports, grew by only 5.1%, far short of the forecast 12.3%. Import growth estimates for 2012 have been revised upward to 5.4% from 4.7%.Sources: Fiji Bureau of Statistics; ADB estimate ( http://www.statsfiji.gov.fj/) , Reserve Bank of Fiji; ADB estimate
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