BSP PNG has reported that while inflation is stable, it continues to climb modestly across the Pacific regions.
BSP Group CEO, Mark Robinson indicated that this trend is fueled primarily by the rise in imported goods, including essential consumer items and fuel.
Mr. Robinson noted that legislative amendments have also impacted inflation rates, especially in Fiji and Vanuatu. Fiji has seen inflationary pressures due to increases in Value-added Tax (VAT) and customs duties.
Meanwhile, Vanuatu is experiencing potential inflation risks this year due to a significant minimum wage increase and recent supply chain disruptions caused by natural disasters.
In response to these inflationary pressures, Pacific monetary authorities are adopting tighter monetary policies, which include hiking interest rates.
“These measures are intended to reduce spending and slow down consumption, helping to control inflation," Robinson explained. He also warned of the possible negative impact of these policies, such as reduced access to credit and the potential stifling of economic activity.
Despite these challenges, there are positive signs on the horizon. Robinson highlighted the increase in tourist arrivals and the robust prices for key agricultural exports as factors that could mitigate the economic slowdown caused by stringent monetary policies. These elements are expected to sustain grassroots economic activities across the region.