IMF forecasts moderate growth

May 29, 2024 12:03 pm

The International Monetary Fund in its 2024 article IV consultation with Fiji says the country’s Gross Domestic Product growth is projected to moderate to three percent this year, owing in part to supply-side constraints in the tourism sector.

It says supported by a gradual rise in tourism sector capacity and policies to address immigration and investment bottlenecks, the Fijian economy is expected to grow around the pre-pandemic trend (which is estimated at around 3¼ percent) over the medium-term.

It stresses that downside risks to the economic outlook include a slowdown in tourist arrivals, high emigration and worsening skilled labor shortages, higher global commodity prices and shipping costs, and limited fiscal space.

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On the upside, the IMF says stronger reform momentum, including to improve the business climate, could stimulate private investment and boost growth.

Fiji’s economy recovered strongly from the pandemic.

Tourist arrivals surpassed pre-pandemic levels last year, yielding GDP growth of an estimated eight percent and erasing pandemic-related output losses.

Inflation ticked up in mid-2023, reaching 4.6 percent year-on-year in March.

The current account deficit narrowed to 7.6 percent of GDP in 2023 aided by the strong rebound in tourism earnings, and foreign exchange reserves remained adequate.

The IMF says supported by the strong economic recovery, the fiscal deficit narrowed to 7.1 percent of GDP, and the public debt-to-GDP ratio declined to 82.7 percent in the Financial Year 2023 (August-July).

It highlights that significant revenue-enhancing measures in the FY2024 budget are expected to further reduce the fiscal deficit and public debt ratios, although both are projected to remain elevated over the medium-term without further measures.