Economic recovery hinges on border reopening
September 29, 2021 4:10 pm
Fiji’s economic recovery hinges on the reopening of international borders and a renewed appetite for tourism says the World Bank in its latest report.
It says the economy is forecast to contract by a further 4.1 percent in 2021 on account of continued border closures particularly in Australia and New Zealand, Fiji’s major trade partners and tourism markets.
The World Bank says growth in Fiji is projected to rebound in 2022 to 7.8 percent assuming the borders reopen in mid next year.
The fiscal deficit is expected to widen to 13.8 percent of GDP this year but to gradually decline thereafter to 4.4 percent of GDP by 2023, as the Government reverts to its fiscal consolidation strategy.
The World Bank says the strategy combines targeted time-bound revenue and expenditure measures, and maximization of concessional financing to cover deficits.
It says the goal is to increase tax revenue from a projected 16.2 percent of GDP in the financial year 2022 to 24 percent by the financial year 2023 through widening of the tax base and implementation of more effective tax collection mechanisms.
Over the same period, the World Bank says expenditures are projected to fall from 37.3 percent of GDP in Financial Year 2022 to around 31.1 percent of GDP by Financial Year 2023 through zero-based budgeting, freezing public sector hiring and wages, and limiting capital spending to high priority projects.
It says the risk of debt distress has heightened with the debt-to-GDP ratio forecast to climb to 75.9 percent in 2021 reflecting borrowing to counter the impact of COVID-19 and the contraction in nominal GDP.
The World Bank adds Fiji’s debt management policies remain prudent, and the authorities are committed to borrowing primarily on concessional terms.
The most recent World Bank DSA assessed public debt to be sustainable over the medium-term assuming fiscal consolidation measures are fully implemented, growth resumes and tourism rebounds.
The current account deficit is forecast to widen to 16.1 percent of GDP in 2021 due to the prolonged border closures halting tourism but to improve steadily to 4.1 percent of GDP by 2023 as international tourism receipts rebound.