year shows a contraction of 1. 4 percent. however, consensus forecasts of recent months show that the global economy is beginning to emerge out of recession. this is now being popularly referred to as “ green shoots ”. a growth of 2. 5 percent is forecast for next year. our trading partners have been quite significantly affected as well. most of them, namely new zealand, the us, euro zone and japan are in recession this year with modest recovery expected for 2010. basically, it means that demand for our goods and services will decline, which will be reflected in our trade performance and current account balance. naturally when the economies of our tourism source markets enter into recession people from these countries tend to travel less. we have been seeing the effects of this downturn on our visitor arrivals since last year. the global economic recession has not only slowed trade and tourism, but also affected investments through tight funding conditions globally. the effects of these are still being felt by many countries, including fiji, but the situation has improved a little as of late. nevertheless, major adjustments by countries are still necessary to sustain these challenging times. in my view we can now quite safely say that the worst is over in terms of the global recession while acknowledging that the recovery will be prolonged. we are looking at maybe 2 to 3 years before the benefits of global economy begin to pass through the fiji economy. you may ask how fiji fared in these very difficult times. well, fiji ’ s economy was affected on many fronts. the demand for a number of our exports was quite adversely affected. remittances, which used to form a substantial part of foreign exchange earnings, virtually collapsed. of course, as i mentioned before, tourism arrivals were significantly affected as well. we also saw that with the massive shifts in global financial flows in the last 12 months the currencies of our major trading partner countries depreciated significantly against the us dollar. this actually led to the fiji dollar appreciating against the currencies of important tourism source markets like australia and new zealand. for a brief period early this year the f $ was even stronger then the nz $. this made fiji very uncompetitive in terms of tourism. these impacts on the fiji economy, of course, had major macroeconomic implications. one of the most significant was the impact on our balance of payments which saw fiji ’ s foreign exchange reserves plummeting very rapidly. this led to extremely tight liquidity in the banking system

, concerns and risks remain. on the external front, high oil prices would place downside risks to the inflation outlook and the balance of payments. ensuring macroeconomic stability is vital for achieving a sustainable growth target of 5 percent. a consistent set of policies is needed to ensure that the stage is set for the economy to grow sustainably into the future. essentially, we need supportive fiscal and monetary policies to ensure a stable macroeconomic environment, in which structural adjustment can be successful. as you are aware, the reserve bank continues to implement policy changes to ensure that there is sufficient liquidity in the banking system at all times, and that our foreign reserves and inflation targets are not threatened. this has entailed recent changes in interest rates and the implementation of a new monetary policy framework. however, considering the limited scope that monetary policy has, it is extremely critical that fiscal policy is at the forefront of meeting the challenges i have outlined. the government has shown great commitment towards fiscal consolidation ; however, it needs to speed up the progress on structural reforms, specifically on key sectors that drive economic growth. with these measures, ladies and gentlemen, i believe we will set in place a framework that would allow the economy to grow on a sustainable basis in the future. thank you very much.