Economic Analysis - Inflation Is Brewing - NOV 2017


BMI View: Inflation in Fiji remains on a broad downtrend amid the wearing off of base effects from Cyclones Winston and Zena in 2016 and we are downgrading our 2017 average inflation forecast to 4.2% from 4.7% previously to reflect this. However, we expect inflation to pick up over the coming months due to the government's expansionary budget and a surge in election-related spending.

Fiji's inflation has remained on a gradual downtrend, with the headline figure coming in at 1.9% y-o-y in August, marking a considerable fall from the high of 6.8% y-o-y recorded in January. With the base effects from Cyclones Winston and Zena showing signs of wearing off, we are downgrading our 2017 average inflation forecast to 4.2% from 4.7% previously. However, inflationary pressures are likely to pick up over the coming months due to the government's expansionary budget and a surge in election-related spending. With growth being a priority, we maintain our forecast for the Reserve Bank of Fiji (RBF) to keep its Overnight Policy Rate (OPR) at 0.5% to support growth, with the central bank having shown a tolerance for slightly higher inflation.

Inflation To Pick Up

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