The Reserve Bank of Fiji (RBF) has warned that the ongoing US‑Iran conflict poses a growing risk to the country’s economic outlook, saying renewed hostilities could push up fuel prices, disrupt supply chains and hit tourism — all of which would dampen growth prospects for 2026. The caution comes as the International Monetary Fund trimmed its global growth forecast for 2026 to 3.1 per cent, a downgrade the RBF said increases downside risks for small, open economies like Fiji.
In a statement this week, the RBF said Fiji’s status as a price‑taker in international energy markets leaves it exposed to prolonged periods of elevated oil prices. Higher global oil costs, the bank warned, would translate quickly into higher domestic fuel and freight costs, raise business operating expenses and erode household purchasing power — squeezing consumption and investment. The bank also flagged that volatility in oil markets can affect travel sentiment and airfares, with a consequent risk of weaker visitor arrivals in the months ahead.
The outlook shift is notable because Fiji recorded a strong start to 2026, with the economy expanding by 7.0 per cent in the first quarter. Nevertheless, the RBF said that, against the backdrop of weaker global growth and heightened geopolitical risk, the GDP growth projection for 2026 is now “downward biased.” Domestic demand is already showing signs of moderation, it added, even as consumption remains supported by rising household incomes, strong remittance inflows and increased employment.
Investment activity, meanwhile, has shown positive signs, the bank noted, supported by growth in new lending, higher construction‑related imports and easing prices for some building materials. But the RBF warned several constraints continue to weigh on investment momentum: rising fuel and freight costs, persistent shortages of skilled labour, and a more cautious “wait‑and‑see” stance by businesses in an election year may all curb new capital spending.
The RBF’s assessment echoes earlier concerns from consumer and market watchdogs that Fiji — which imports all its fuel and relies heavily on global shipping — is vulnerable to external shocks. Analysts have previously warned that surging oil prices can feed quickly into domestic fuel and food bills, given Fiji’s dependence on imports and the standard one‑month lag in fuel price adjustments.
For policymakers and private sector actors, the RBF’s statement underscores the need to monitor external developments closely. The bank did not announce specific policy moves in its statement but framed the risks as one of the key downside scenarios facing the economy as the year unfolds. With global growth downgraded and geopolitical tensions showing no clear resolution, the upside surprise from Q1’s strong expansion faces near‑term headwinds.
Businesses that depend on tourism and trade will be among the most exposed if oil and freight costs remain elevated or travel sentiment weakens. The RBF’s warning therefore serves as an early signal to firms, investors and government agencies to factor in a more cautious external environment as they plan for the remainder of 2026.