Fiji’s annual inflation rose to 7.1 percent in April, the highest observed in the past 10 years.

This was highlighted by the Reserve Bank of Fiji in its latest update.

RBF Governor, Ariff Ali says the outturn in the inflation rate reflects the higher prices for food, as well as alcoholic beverages, narcotics, and tobacco.

The prices of agricultural produce also increased impacted by weather conditions and the pass-through of tax increases.

Ali says while the outlook for inflation is to moderate once the full impact of the VAT increase tapers off in August the RBF will closely monitor the effect of wage demand on inflation.

The RBF Board has maintained the Overnight Policy Rate at 0.25 percent as partial indicators suggest a slowdown in domestic economic activity alongside some constraints and risks affecting the growth outlook.

Ali says domestically the labour market remains constrained amid the continued outflow of skilled and experienced labour due to high emigration.

Ali says with the tight labour market, wages paid have increased notably but are uneven across sectors.

He states that visitor arrivals a crucial component of domestic economic activity, continued to register annual increases in the year to April.

However, the governor says visitor arrivals from Australia, Fiji’s largest source market have been lower this year compared to last year.

Nonetheless increased arrivals from other markets which include New Zealand, China, United States, Japan and Europe compensate for this loss.

Ali says consumption spending remains positive yet cost-of-living pressures and high emigration are stalling its momentum.

The RBF’s February Retail Sales Survey also indicates a deceleration in consumption spending this year.

Ali says while pipeline investments look encouraging, current private sector investments remain below potential due to a number of challenges, including the availability of labour.