The Asian Development Bank says Fiji spent most of 2025 in deflation, with prices falling for ten consecutive months and an overall decline of 1.4 percent for the year, culminating in no headline inflation for December. In its latest country report released last week, the ADB credited reduced VAT rates and strong supply conditions for keeping consumer prices subdued across a range of everyday goods.
Lower prices for food, transport, fuel and household goods were the main drags on the consumer price index, the bank said, offsetting increases in alcohol, restaurants and other services. “Ten consecutive months of deflation… culminated in no headline inflation in December,” the ADB wrote, underlining how persistent the downward pressure on prices has been through the year.
Despite the slide in prices, household spending remained resilient. The ADB flagged a 23.6 percent jump in new consumption lending and a 9.2 percent rise in private sector credit as evidence that consumers continued to borrow and spend. The report also highlighted growth in inward remittances and a surge in vehicle registrations as further indicators of sustained consumer confidence. “Consumption indicators remain strong,” the bank said, noting that higher wages and improved access to credit have supported domestic demand.
Monetary conditions have played a supporting role. The ADB said an accommodative monetary policy stance and ample banking liquidity have kept interest rates low, encouraging borrowing. Those conditions, together with fiscal measures such as the lower VAT rates, have helped translate subdued prices into continued household and business activity rather than a sharp pullback in spending.
The report’s findings arrive as policymakers weigh trade-offs. Lower VAT and plentiful liquidity have eased cost-of-living pressures for consumers, but protracted deflation can complicate revenue forecasts and investment decisions. External risks also threaten to change the picture: previous reporting has cautioned that global fuel price shocks — including those linked to heightened tensions in the Middle East and risks to shipments through the Strait of Hormuz — could push domestic prices higher, reversing some of the disinflationary trend.
For now, the ADB’s assessment suggests a domestic economy in which falling prices have not choked off demand. The challenge for authorities will be to manage the transition if global energy markets or other external factors rekindle inflationary pressures, while balancing the fiscal impact of lower VAT revenues and continued support for growth.
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