Construction to Pick Up

May 14, 2018, 9:57 a.m.

Despite the decline in domestic cement sales, Fiji's construction activities are expected to increase in the coming months, according to the Reserve Bank of Fijis economic review for the month ending April.

It noted that domestic cement sales - an indicator for construction sector activity- declined by 20.2 per cent cumulative to March.  

The decline in cement sales is expected to be temporary and should pick up in the months ahead. In the same period, lending for investment purposes also declined by 23.3 per cent largely due to base-related effects, the RBF stated.

Nonetheless, construction and investment related activities are expected to gain momentum as a result of post disaster rehabilitation works as well as the ongoing private sector projects.

The bank said labour conditions were favourable in March and that monetary conditions remained supportive of growth as private sector credit expanded by 7.8 per cent from the 8.1 per cent noted in the previous month.

New lending from commercial banks have slowed to 7.1 per cent due to negative growth in sectors such as building and construction and real estate, combined with lower credit growth to wholesale, retail and the hotels and restaurants sector.

The economys growth projections for 2017-2020 has also been revised, and expected to expand for the ninth consecutive year in 2018, though at a slower pace of 3.2 per cent, compared to the 3.6 per cent projected in October 2017.

The lower projection is primarily a result of the devastative effects of Tropical Cyclones in Josie and Keni in early April, particularly on the agriculture sector, confirmed RBF Governor, Ariff Ali, who chairs the Macroeconomic Committee.

Growth in 2018 will therefore be largely driven by the public administration, wholesale and retail trade, construction, information and communication, and accommodation and food services sectors, he added.

The growth outlook for 2019 has been revised from 3.2 per cent to 3.4 per cent, while the baseline forecast for 2020 remains the same at 3.2 per cent. The estimated growth rate for 2017 is also unchanged and remains at 4.2 per cent, though the committee notes there are some changes in sectoral contributions.

While the recent supply-shock from the two cyclones and flooding is expected to put upward pressure on prices in the coming months, inflation is forecast to stabilise at around 3.0 per cent by year-end. For 2019-2020, inflation is forecast to be around 2.5 per cent, barring any supply side shocks, Ali emphasized.

As at May 10 this year, foreign reserves were $2.2 billion, which was noted to be sufficient to cover around 5 months of retained imports and non-factor services, and expected to remain at adequate levels in the near to medium term.