economies, our financial institutions play a very key role in the socioeconomic development of fiji. central to this process is the role of the reserve bank in not only ensuring that monetary policy is appropriate but that the financial system is stable and sound. this has become more critical in light of the impact of the recent global financial crisis. the enormous costs borne from the negative impact of the crisis, is a lesson which has forced central banks to rethink their monetary policy strategies and strengthen macro - prudential supervision and regulation, in aiming to avert the adverse impact of possible future crises. having said this, it is noteworthy that fiji ’ s financial system was largely insulated from the direct impact of the global crisis which began 3 years ago. however, the devastating economic fallout and implications of that event on both developed and developing countries has provided valuable lessons for small developing nations like ours. bankers and regulators have come under increasing pressure to implement reforms, improve supervision, curb excessive compensation and limit their appetite for risks so that the stability of the financial system is preserved. nevertheless, the indirect impact of the crisis through reduced global demand for our exports and tourism services, together with the adverse effects of the floods and cyclones on major domestic industries, hugely impacted our balance of payments, which deteriorated significantly early last year, prompting the reserve bank to put in place specific policies as a response to the in favourable economic situation. as we saw, the economic situation turned around and the country is now on a path to recovery. the current economic conditions and outlook for fiji ’ s economy is stable. however, there are some risks to be borne in mind, which can have possible adverse impact on the economy should they occur. let me share a little on recent economic developments. as a background to domestic developments, the global economy continues to recover at a better than expected rate. the pace of this growth, while largely driven by asia, varies significantly across the major regions of the world. in line with the improved outlook for the world economy, the growth of our major trading partner economies from this year onwards are all expected to be positive. this positive outturn augurs well for us in terms of expected increases in visitor arrivals and higher demand for exports. the latest economic projections for this year show that the economy is expected to grow marginally, following a notable contraction of 3. 0 percent last year. this year ’ s marginal growth however, reflects a broad - based recovery, with the exception of the sugar sector. the turnaround in

output is expected in the major sectors for wholesale and retail, construction, mining and quarrying, hotels and restaurants, manufacturing, education, fishing and finance, all of which declined last year. not with standing the weak turnaround in overall output forecast for this year, performances in some of our major sectors so far have been encouraging. tourism has recovered very strongly. visitor arrivals are higher by around 20 percent compared to the last two years. the tourism industry is clearly on track to achieve its targeted 600, 000 record arrivals for the year. activity in the mining and export sectors is also encouraging. exports, particularly of gold, fish, mineral water and timber, continue to gain momentum, supported by favourable commodity prices. the outlook for this sector is very promising and bodes well for our balance of trade. in contrast, output in the sugar sector has been very disappointing. sugar production has been declining over a number of years. the deterioration in both cane and sugar production has been attributed to frequent mill problems which have restrained cane harvests and affected mill efficiency. unfortunately, the mill upgrade over the past three years has not been able to produce the desired results and has only added to the debt burden of the government. however, the outlook for this critical industry is positive pending the implementation of a range of reforms to bring the industry back to its glory days. it is encouraging to note the prime minister ’ s recent pledge to fix the industry and safeguard the livelihood of nearly 200, 000 people who rely on the sugar sector. consumer spending has picked up slightly from levels recorded last year, as indicated by recent partial indicators. higher net value added tax ( vat ) collections and pay as you earn collections indicate growth in private consumption. this has also been supported by strong visitor arrivals and increases in inward remittances. inward remittances which has fallen significantly over the last 3 to 4 years is recovering very strongly. against this macroeconomic background, the reserve bank continues to focus monetary policy on ensuring that the interest rate environment is appropriate and liquidity is adequate at all times to allow credit to grow. inflation has significantly trended downwards in recent months as the effect of the devaluation has fully worked through the economy. from a peak of 10. 5 percent in april, inflation has fallen to 1. 1 percent in september, and is forecast to be around 4. 0 percent or less by the end of the year. foreign reserves, i am pleased to say, have held up very well this year