Fiji is experiencing improved business confidence and investment

Moves for elections improving confidence in Fiji, says ratings agency (Credit: ABC)

In its first assessment of Fiji in a year the international rating's agency Moody's puts the improved conditions down to moves towards the country's first elections since the coup in 2006.
Presenter: Jemima Garrett
Speaker: Christian de Guzman, Moody's Vice President
DE GUZMAN: In Fiji, for example we are seeing an increase in construction activity and I think that is also reflected in the increase in investment in a lot of the tourist facilities that we are also seeing. We are seeing a lot of build up and we think that is really due to an increase in confidence ahead of the elections. I think people there and investors are pretty sure that elections will go ahead and there will be a normalisation, in terms of its foreign policy and its relations with its neighbours and that should be good for the economy.
GARRETT: So just how much new investment are you seeing?
DE GUZMAN: Well, that is reflected, for example, where we see loan growth out of the commercial banks. You know, loan growth last year was up 18 per cent, whereas in previous years it was much lower than that even though policy rates haven't really eased since 2010. So this really is, I think, a reflection of increased confidence rather than just easy money.
GARRETT: You say that Fiji is also seeing fiscal and debt consolidation on the part of the government and that that has boosted its sovereign creditworthiness. What are you seeing there?
DE GUZMAN: Yeah, sure. I guess when you first look at the debt burden, we have seen the debt burden come down by seven percentage points of GDP (Gross Domestic Product) from around 56 per cent of GDP to just under 50 per cent of GDP in 2013. And when you look at the fiscal deficts, they have also narrowed considerably to less than one per cent of GDP, last year in 2013, from about 4 per cent of GDP in 2009.
GARRETT: So what sort of economic growth is Fiji looking at this year and into the future?
DE GUZMAN: We are looking at, I think, real GDP growth of around three per cent this year and in the future, I mean, it will probably be less than that. We think the trend growth in Fiji is around 2 per cent but nevertheless the performance over the last couple of years has been impressive by Fijian standards. Nevertheless, I think we would like to point out that even though growth has been healthy, it's still is lower than where we see countries at a similar level of development, which are typically much higher.
GARRETT: So what does Fiji need to do to reach that new level that other countries are experiencing?
DE GUZMAN: I think there is a number of things they can do. I guess the first is proper investment in human capital and lots of reform related to the way they conduct agriculture. Land reform is something they really need to tackle in terms of increasing productivity in agriculture, for example. Improving the tourism facilities, they've already got quite a nice tourism balance but more would help as well as really capitalising on the human capital that they have.
GARRETT: As you mentioned Fiji has its first post-coup elections in September. How much of a risk to growth is there if the elections are not free and fair?
DE GUZMAN: I think that is one of the big risks that we are looking at. As I have mentioned, a lot of the confidence that we are seeing is really based on optimism that elections will happen and there is a normalisation of relations vis a vis neighbours. But I think if it were not to happen, I think that would be the greatest risk to growth not just for this year but going forward.
GARRETT: Well, Moody's job is rating countries and corporations. Just how does Fiji rate now and what is the outlook?
DE GUZMAN: Well, we have the outlook as stable despite the developments we have talked about and that is because of the big risk fact factor that is present, we think, due to the elections. We have the rating currently at B1, which is far lower than the triple A rating of Australia and New Zealand, and also at the same level as Papua New Guinea.

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