The Reserve Bank of Fiji (RBF) has reported a slow recovery in investment indicators, reflecting the challenges posed by a high-cost environment, according to its August economic review. While new investment loans witnessed a slight rise of 1.4% by July, primarily driven by increased lending in real estate and household investment properties, the overall investment landscape faces significant obstacles.
A major issue during the year’s first half was a 14.4% drop in cement sales, a key component for the construction industry. This decline can largely be attributed to the temporary closure of Pacific Cement Limited’s mill from March to June, which likely disrupted numerous construction projects. This demonstrates the crucial role supply-side factors play in influencing the recovery trajectory. Additionally, although the issuance of new building permits rose by 11.3%, the total value of these permits fell by 21.5%. The decrease is due to lower values in private dwellings, which counteract gains in commercial building permits.
High construction costs remain a significant hurdle, with the building materials price index increasing by 4.0% in the first half of the year. This rise in costs poses a substantial constraint on investment activities. Nevertheless, a recent reduction in the VAT rate is perceived as a potentially positive factor for enhancing investor sentiment.
Despite these challenges, credit activity showed resilience in July, spurred by favorable financial conditions. The growth in the broad money supply was primarily driven by a 9.5% increase in private sector credit, indicating strong support from the banking sector for economic activity. The broader economic environment maintains a cautious optimism, supported by robust credit activity and policy adjustments aimed at boosting investor confidence.
These findings resonate with earlier economic reviews, where the RBF highlighted tentative recovery signs in investment amidst challenges such as rising global costs and external uncertainties. Looking ahead, although global conditions could present potential difficulties, targeted domestic measures including VAT reductions and favorable financial conditions aim to steer Fiji towards a more stable investment recovery. As Fiji continues to navigate its economic landscape, there is hope for gradual improvement within the sector, dependent on policy enhancements and effective cost management.