sada s reddy : the future for fiji ’ s economy presentation by mr sada s reddy, governor of the reserve bank of fiji, to the fiji institute of accountants, yanuca, fiji, 11 june 2010. * * * the president of the fiji institute of accountants, distinguished guests, ladies & gentlemen good morning thank you for inviting me to speak to you on the future for fiji ’ s economy. it goes without saying, ladies and gentlemen, that this is a daunting task for the governor of a central bank to speak on given that a central bank has a much narrower role in the economy. the role of a central bank first and foremost is to maintain price stability. this in itself is a very challenging role. on top of this, in fiji ’ s case, we also have an equally important task of ensuring that our balance of payment is sustainable. in other words, we have to ensure that our foreign reserves are kept at adequate levels. i am sure most of you in the audience have been closely following the developments in this regard in fiji over a number of years but more importantly, over the last three years, with the onset of the global economic and financial crisis. ladies and gentlemen, herein lies the reason for me to muster the courage to talk to you today about fiji ’ s economy and how i see its future. in some respects, my speech will be a “ hardtalk on fiji ’ s economy ”. to get a better idea of our future, it is important to look to the past, learn from the lessons and chart a way forward for our country. in doing this, we must also understand how domestic and external factors impact our economy. ladies and gentlemen, i will first look at the performance of the global economy, particularly at the performance of our trading partner countries. i will then discuss the domestic economy, where i will touch on fiji ’ s macroeconomic performance and challenges, and what we must do to ensure that we secure a better future for all. 1. global economic conditions and outlook let me begin by summarizing the conditions in the global economy. according to the international monetary fund ( imf ), the global economy is expected to grow by 4. 2 percent this year, following a contraction of 0. 6 % in 2009. further growth of 4. 3 percent is expected in 2011. the contraction of last year is regarded as the worst since the great depression of the 1930s. however, that is now well behind us. ladies

and gentlemen, except for australia, all our trading partner economies contracted last year as a result of the global financial crisis. this significantly affected our exports and tourism last year. however, all of these countries are expected to post a modest growth this year and continue this into 2011. this is good news for fiji, as demand for our exports and tourism should increase. in fact, we are already seeing the effects of these, especially in the tourism industry, where we see a strong recovery in visitor arrivals. overall, the global economy has performed better than expected. among advanced countries, the us economy is doing better than europe and japan, while for emerging and developing economies, asia is driving the recovery. china and india recorded high growth rates in 2009 and are expected to record similar growth in 2010. china ’ s growth quickened to around 12 percent in the first quarter of this year, the fastest pace in almost three years, driven by stimulus spending and a credit boom. having said that, we are also witnessing some countries, especially in the euro area, experiencing great economic difficulties due to debt service problems arising from running several years of large fiscal deficits. and this was compounded by the global crisis. for this reason, growth in the euro area will be very uncertain. and these uncertainties are causing significant risks to the international capital markets as well as prospects for growth worldwide. once again this demonstrates the great risks out there for a sustained global growth. 2. macroeconomic performance and challenges ladies and gentlemen, let me now share with you my views on the fiji economy. this is not going to be an easy task. why? this is because the current state of our economy is a result not only of recent global and domestic developments but it is due to some very long - term fundamental problems in the economy, going back ten, twenty years. these issues have been compounded by various governance issues both at the national and at organizational and / or industry levels. for now, let me begin by saying that fiji has huge potential. i do not think anyone in this audience will disagree with me. we have huge potential in tourism, agriculture, forestry, fishing, sports, itc etc. fiji is endowed with rich natural resources such as land, a huge marine environment, and minerals such as gold, copper and other minerals. fiji ’ s tropical climate and pristine environment is a huge advantage which attracts thousands of tourists to our shores. fiji ’ s relatively more developed status places it as the financial and trade