The Reserve Bank of Fiji has kept the Overnight Policy Rate at 0.25%, underscoring a domestic economy that remains buoyant on consumption and shows signs of resilience in the tourism sector, even as some sectors continue to face headwinds. The central bank reiterated its dual mandate of keeping inflation low while maintaining adequate foreign reserves.
Inflation continues to present a favorable backdrop, with the annual headline rate recording a negative reading of -0.4% in July, marking a second consecutive month in negative territory. The decline is largely driven by lower prices in food, fuel, and transport. The bank also highlighted that recent tax cuts in the 2025-26 National Budget are expected to exert further downward pressure on inflation in the near term.
Foreign reserves remain comfortable at about $3.9 billion, ample to cover six months of imports, providing a robust buffer against external shocks as the economy navigates global uncertainties. While tourism overall posted a small decline in arrivals through July, there were pockets of improvement: Australian arrivals rebounded in July, and US visitors continued to grow, contributing to a more balanced near-term tourism outlook. The VAT reduction is expected to enhance Fiji’s appeal as an affordable destination, potentially boosting tourism spending in the months ahead.
Domestic consumption continues to be a key growth pillar. Net VAT collections rose by 5.4%, vehicle registrations jumped 22%, and consumption lending advanced by 35.1%, supported by remittances, low interest rates, and higher incomes. These dynamics have helped sustain strong consumer activity even as investment activity remains slower, hampered by high construction costs. Still, a pipeline of large projects, supported by budget policies and easing labor pressures, could lift investment momentum in the coming quarters.
Private sector credit has expanded, reflecting a liquidity-rich banking system. Lending growth stood at 9.5%, with banking system liquidity around the $2.2 billion mark. The RBF stressed that it will continue to monitor global and domestic risks, including geopolitics and trade developments, and adjust monetary policy as needed to nurture the economy’s resilience.
Commentary and context from broader recent updates show a consistent pattern of inflation moderating from elevated levels, steady or growing reserves, and a still-robust consumer sector, even as investment and some tourism metrics face ongoing challenges. The central bank’s cautious but attentive stance signals a commitment to balancing growth with price stability in an uncertain global environment.
Overall, Fiji’s economic outlook remains cautiously positive, anchored by resilient domestic demand, a stable monetary stance, and a healthy buffer of foreign reserves, with policymakers ready to respond to evolving risks while supporting ongoing recovery and growth.
Summary: Fiji’s central bank held the OPR at 0.25% as inflation drifts lower and reserves stay ample, while consumption and tourism show resilience and a pipeline of large projects could lift investment. The bank will keep a vigilant eye on global risks and adjust policy as needed to sustain stability and growth.
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