which were affected by the global crisis. like most of the other countries the fiji economy was also significantly affected. but not as badly as some others. in addition to the global crisis, fiji also suffered one of the worst flooding in its history in january this year. when the year started we were expecting a positive growth of around 2 percent. however, the double effects of the global crisis and the floods led us to revise our economic forecast down to minus 0. 3 percent. some of the sectors which were directly affected through the global crisis were tourism, inward remittances and exports such as fish, timber, garments, bottled water and some other manufactured items. however, i am pleased to say that tourism is now picking up strongly and the declines in earnings from remittances are slowly reversing. the other exports, of course, are heavily dependent on the global recovery. however, as i said earlier, we are now seeing definite signs of recovery in our major trading partner economies, and if this continues, i am quite confident that most of our exports should start to recover from next year, if not sooner. against this background we are now expecting the fiji economy to recover modestly at around 2 percent next year. fiji ’ s balance of payment came under severe pressure over the last 24 months and more so early this year. the foreign reserves dropped very rapidly to below 2 months of imports or f $ 430m. however, assisted by various policies put in place since mid - april, the foreign reserves have recovered strongly and are over 3 months of imports or f $ 980m as of last friday. one of the major policies was the devaluation of the f $ by 20 percent on 15th april this year. this devaluation became necessary as the fiji $ appreciated significantly against two of our major trading partners, namely australia and new zealand. at one stage early this year, f $ was even stronger then nz $. this was unsustainable. the reason for f $ to strengthen was not because of any inherent strength in the fiji economy, but was largely due to the global crisis which led to nz $ and a $ depreciating significantly against the us $. i am pleased to say that with the level of reserves now reaching a comfortable position, the reserve bank has eased credit policy by lifting the credit ceiling that was put in place in december 2006. interest rates are now trending downwards with liquidity in the banking system at around f $ 270m

. at our last monetary policy meeting, we upheld the assessment that inflation will converge to levels that are below, but close to, 2 % over the medium term. wages are picking up at a pace that is more or less in line with expectations from our models. one thing that has not worked out as expected is the transmission to consumer prices. this pass - through is not working in line with projections. we are analysing this very carefully. but we remain confident that it will eventually do so ; we need to be patient and persistent. but what if the economic outlook deteriorates further and more permanently? in our baseline scenario, capacity utilisation will remain high and firms will be in a position to pass higher wages through to higher prices. that would be more difficult if growth remained below potential. downside risks to growth could then lead to downside risks to inflation in the medium term. we are not at that stage yet, but this will be an important discussion point at the next meetings of the ecb ’ s governing council. but if the outlook becomes gloomier, what will happen then? will the ecb ’ s governing council be even more careful in continuing on its cautious path towards monetary policy normalisation or could there be another turn towards more easing? i have never spoken about a normalisation of our monetary policy stance. i have always referred to a normalisation of our instruments. there is a big difference. after the end of our net asset purchases, the primary instrument to steer our monetary policy stance is again our key interest rates. and as far as their path is concerned, we continue to expect them to remain at their present levels at least through the summer of 2019, and in any case for as long as necessary to ensure the continued sustained convergence of inflation to levels that are below, but close to, 2 % over the medium term. this rotation of instruments from net purchases to the rate path has been implemented in such a way as to preserve our accommodative monetary policy stance. we have thus not tightened our monetary policy. moreover, we have made it clear that, in any event, we stand ready to adjust all of our instruments, as appropriate, to ensure that inflation continues to move towards our inflation aim in a sustained manner. president mario draghi always stresses that the toolbox is full. but with interest rates at or even below zero and the asset purchase programme at its self - imposed limits, what else is really left? if there is