Westpac Fiji has downgraded its real GDP forecast for 2021, projecting the Fijian economy to contract by 4.2%.

This is in contrast to a growth of 2.3% anticipated earlier.

Westpac says economic activity remains below last year’s levels due to continued weakness in sectors closely linked to the international border and the halt in domestic activity due to restrictions.

For 2022, growth will be propelled by re-opening, and rebounds as a successful vaccine rollout is expected to bring the pandemic under control.

Westpac adds there is hope that international borders will re-open post quarter one, leading to a projected recovery of 14.5% in 2022.

It also says a key dynamic that would reshape parts of economic landscape over the coming year is the budget announcement on 16th July.

To cater for the impact of the pandemic, Government expenditure is expected to be propped up and revenue is still projected to be lower than anticipated earlier.

Westpac add the government needs to keep hopes for the recovery alive and kicking and on a sustainable path.

Overall, the economy is still very fragile and there remains considerable uncertainty around the health and economic outlook resulting in low consumer and business confidence.

A more persistent pandemic, financial sector stress and any natural disaster could derail the expected recovery for next year.