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Fiji
Synthesis
major macro economic indicators
2020 | 2021 | 2022 | 2023 (e) | 2024 (f) | |
---|---|---|---|---|---|
GDP growth (%) | -17 | -4.9 | 20.0 | 7.9 | 3.2 |
Inflation (yearly average, %) | -2.6 | 0.2 | 4.3 | 2.3 | 3.8 |
Budget balance (% GDP) | -11.5 | -12.1 | -7.1 | -4.8 | -3.6 |
Current account balance (% GDP) | -13.7 | -15.9 | -17.3 | -7.9 | -9.0 |
Public debt (% GDP) | 63.1 | 83.0 | 89.5 | 82.3 | 81.2 |
(e): Estimate (f): Forecast
FY2024: 1 August 2024 to 31 July 2025
STRENGTHS
- Economic, transportation and academic hub in the Pacific
- Main industries: tourism sector, sugar industry, fishing and minerals
- Young population (according to the 2017 census, the median age was 27.5)
- Sovereign risk is limited by the large funding from the Fiji National Provident Fund (FNPF) and increasing level of financial support from international financial institutions and bilateral partners
WEAKNESSES
- Import dependency, chronic trade deficits
- Vulnerable to natural disasters
- Remoteness and small domestic market
- High dependency on tourism (26 % of GDP, 36.5 % of employment in 2019)
- Weak business environment and regulatory framework
- High youth unemployment rate
- On the EU tax blacklist
Risk assessment
Tourism-led recovery
The Fijian economy pursued its robust recovery in 2023, buoyed by tourism, nearly reaching pre-pandemic levels. While total exports benefited from increased re-exports to Pacific Island nations, subdued global demand and lower export prices, coupled with the strength of imports linked to that of domestic demand, hampered external performance. After two exceptional years, the island nation's growth is expected to normalise in 2024, with tourist arrivals, household consumption, and heightened budgetary expenditures being the main drivers.
Tourism plays a pivotal role in the country's economy, representing 26% of GDP, employing 36.5% of the workforce before the pandemic, in 2019, and serving as the primary source of foreign currency. Despite challenges, 2023 saw arrivals reach 91% of 2018 levels, with notable increases from key markets like Australia, New Zealand, USA, and Pacific Islands. However, Chinese tourism (comprising approximately 6% of visitors in 2018) lagged and experienced a 47% decline compared to 2018 levels. To address this concern, Fiji has implemented various strategies, including facilitating more direct flights from Hong Kong to Nadi, collaborating with Chinese travel service providers, and launching targeted marketing campaigns. Tourism is poised for a full recovery in 2024, returning to pre-pandemic levels. In 2023, inflation averaged 2.3%, down from 4.3% in 2022. However, it spiked significantly in the last quarter of 2023, reaching 4.9% in December, driven by higher shipping costs, and VAT and other tax hikes that translated into higher consumer prices. While a durably tight labour market will continue to support consumption, it could be negatively impacted by the expected acceleration in inflation in 2024.
In 2023, Fiji's foreign trade balance deficit widened and external trade contributed negatively to the country’s economy. In 2023, the trade deficit reached 4.58 billion FJD (USD 2 billion), the widest point since data began being recorded in 2014. Domestic exports (56% of total exports) saw a decline of 2%, while re-exports increased by 11%, concurrent with a 5.8% rise in imports. The drop in domestic exports is attributed to lower mineral water, gold, fish, timber and molasses exports. While export prices rose by 7% YoY in the first quarter of 2023, they fell by an average of 1.7% over the rest of the year, driven by a 14% drop in export prices for mineral products. Meanwhile, machinery transport equipment, mineral fuel, and food were the main drivers behind the increase in imports. While import prices increased by 13% in 2022 due to surging commodity prices, in 2023 they remained higher than their pre-pandemic levels. Even if the secondary income and services accounts will support the current account in 2024, a still negative primary income account and a deteriorating goods balance due to still high commodity prices are expected to widen the deficit. The current account is expected to be supported by tourism revenues and inward remittances, but their increase is expected to be lower than a year ago as the economy normalises. Foreign exchange reserves (mainly consisting of gold at approx. 55%), remained at an acceptable level, covering roughly 5 months of imports.
Expected increased budget spending
For the budget year 2023-2024, the country's deficit is expected to decrease, albeit persisting. The government planned to expand public spending but anticipated an increase in revenue driven by the resurgence of tourism and tax reforms. A deficit target of 639 million USD (about 4.8% of GDP) was set. Through the budget, the Fijian government is seeking to be conservative in its finances and focuses on debt sustainability.
Government revenue is expected to surge by 38%, primarily due to enhanced tax collection. The reopening of borders in December 2021 is expected to further fuel tourism receipts, targeting earnings of USD 2167 million in 2024. Furthermore, increased corporate, departure and VAT taxes are also anticipated. Government spending was earmarked for a 26.3% increase, prioritising social protection, education, and health. With revenue growth outpacing expenditure, a decline in fiscal deficit and public debt ratio is anticipated. The budget deficit is expected to be financed mainly by domestic borrowing, while overseas loans and grants come from a variety of sources: World Bank, Asian Development Bank, New Zealand and Indonesian governments, etc.
Divided but resilient coalition
After 16 years under Frank Bainimarama's rule, a new government took office in December 2022 following the national elections. Sitiveni Rabuka became the Prime Minister, leading a three-party coalition known as "The People’s Coalition." Winning with a narrow margin of 28 votes in Parliament compared to Bainimarama's 27, Rabuka's victory marked the third general election since democratic reforms were introduced under the 2013 constitution. Rabuka's administration swiftly reversed the previous regime's policies, prioritising domestic reforms and indicating shifts in foreign relations. Initially leaning towards closer ties with China and displaying skepticism towards traditional Western allies such as Australia, the United States, and the United Kingdom during the election campaign, Rabuka later changed his stance.
Political uncertainty loomed large due to divisions within the coalition. Fiji's vote against a humanitarian truce in Gaza at the United Nations in October 2023 sparked internal criticism within The People’s Coalition. Facing strong opposition, Rabuka's pro-Israel position eventually gave way, leading Fiji to support an immediate humanitarian ceasefire at the United Nations in December 2023.
Fiji’s history of political instability is characterised by four military coups between 1987 and 2006, but the Rabuka coalition has already surpassed the longest tenure of any Fijian administration established through a peaceful transfer of power, despite ongoing tensions and uncertainties.
Last updated : February 2024