The Reserve Bank of Fiji (RBF) has observed a sluggish recovery in investment indicators amidst a challenging high-cost environment, as outlined in its August economic review. Notably, new investment loans saw a modest rise of 1.4% through July, mainly attributable to increased lending in real estate and household investment properties. Despite this slight uptick, the investment landscape is marred by fluctuations and challenges.
During the first half of the year, there was a 14.4% decline in cement sales, a critical component for construction, primarily due to a temporary shutdown of Pacific Cement Limited’s mill between March and June. This likely interrupted several construction projects, reflecting how pivotal supply-side factors can impact the recovery trajectory. Meanwhile, the issuance of new building permits increased by 11.3%, yet the overall value of these permits dropped by 21.5%, indicating a decrease in private dwelling values that offset commercial building permit gains.
Rising construction costs continue to be a barrier, with the building material prices index increasing by 4.0% in the first half of the year, posing a significant constraint on investment activities. However, a recent reduction in the VAT rate is seen as a potential catalyst for improving investor sentiment.
Despite these hurdles, credit activity was robust in July, driven by favorable financial conditions. The growth in broad money supply was mainly due to a 9.5% increase in private sector credit, demonstrating ongoing support from the banking sector for economic activity. The broader economic environment remains cautiously optimistic, underpinned by strong credit activity and policy adjustments designed to bolster investor confidence.
The findings align with earlier economic reviews, where the RBF noted tentative signs of recovery in investment despite pervasive challenges like rising global costs and external uncertainties. Looking forward, while global conditions present potential headwinds, targeted domestic measures such as VAT reductions and supportive financial conditions aim to navigate Fiji towards a steadier investment recovery. As Fiji continues to strategize around its economic landscape, there remains hope for gradual improvement within the sector, contingent on policy enhancements and cost management.