Had it not been for the January floods, Fiji would have actually grown marginally this year.

Those were the words of Reserve Bank Governor Sada Reddy who clarified the state of the Fiji economy in response to the ADB report "Pacific Economic Monitor" which predicts that Fiji is expected to experience a worse than expected contraction in economic growth.

Reddy also said as a result of the worsening global economic and financial conditions, as well as the January floods the economy is expected to contract by 0.3 percent this year.

However, Reddy stressed that the contraction projected for Fiji's economy is milder than that being experienced by Fiji's major trading partner countries and the RBF is optimistic that the economy will rebound next year to a modest recovery.

He said although visitor arrivals have declined, indications from the industry is that this may now be slowing down and the bank expects visitor arrivals to fall by a smaller magnitude by the end of the year.

The Governor said it is interesting to note that foreign reserves improved from around $400 million before the devaluation to around $640 million now.

He said although the bank expects inflation to increase as a result of the devaluation, growth in prices is expected to be moderate to around 2% by December.