Inflation‘stable but elevated’

INFLATION is stable but remains elevated and on a slightly upward trajectory in all Pacific markets, says Bank of South Pacific Financial Group Limited chief executive officer Mark Robinson.
He said imported inflation through consumer goods and high-priced fuel imports contributed to the consumer price index (CPI) increases across the South Pacific.
“CPI increases are largely attributed to the increased cost of imported goods, including food items, household goods, and fuel,” he said.
He added that legislative changes also added to inflation in Fiji and Vanuatu.
Increases in the Value-added Tax (VAT) and customs duties in Fiji place upward pressure on prices in that market, while a 36 per cent increase in the minimum wage from 2023 as well as supply chain disruptions from natural disasters pose risks to Vanuatu’s inflation rate in 2024.
Robinson explained that most monetary authorities in the Pacific markets were responding to inflation concerns by taking a contractionary monetary stance and increasing interest rates.
“This has the intended effect of tightening money supply to control spending and consumption in the economy, thereby cooling down inflation,” he said.
“These measures, however, also have the adverse effect of restricting access to credit and may hinder economic activity if prolonged.”
However, Robinson sees upsides.
“The increasing visitor arrivals to the South Pacific as well as high prices for key agriculture exports will help bolster activity at the grassroots level despite the monetary tightening to address inflation,” he said.
The World Bank through its economic outlook for PNG and the Pacific says inflationary pressure remained low in 2023.
The Bank of PNG has also allowed a moderate depreciation of the kina to address foreign exchange issues.