In 2025, Fiji experienced a significant shift in its inflation dynamics, transitioning from a period of persistent inflation to broad disinflation and even steep deflation. According to Westpac Pacific Economist Shamal Chand’s quarterly economic update, headline inflation began the year at 2.5% but fell below zero in February, remaining negative for much of the year.
The lowest point of inflation occurred between August and October, where it reached between -3.5% and -3.4%. By December, inflation gradually returned to zero, with the annual average for the year resting at 1.4%. Chand identified that the decline was primarily driven by tradable goods instead of services, with food and non-alcoholic beverages witnessing an average decrease of 3.3% in 2025 and transport costs dropping by 4.8%. These reductions were attributed to lower imported food prices, better global supply chains, and lessened fuel costs when compared to the previous years spanning 2022 to 2024.
By the end of 2025, monthly inflation rates had stabilized, suggesting that the cycle of imported disinflation was largely concluding. Nevertheless, certain sectors continued to feel the pressure of structural inflation, particularly in services. Notably, alcoholic beverages and tobacco saw an increase of 3.1% on an annual basis, while restaurants and hotels climbed by 2.9% and miscellaneous goods and services experienced a notable rise of 5.6%. Chand explained that these increases typically reflected heightened demand from tourism, pricing adjustments, and service costs that do not decrease as quickly as those driven by commodities.
The January 2026 Consumer Price Index (CPI) further illustrated this situation, revealing a continued negative inflation rate at -2.5% year-on-year and -0.8% month-to-month, with an annual average at -1.8%. Despite the overall disinflation, certain components like alcoholic beverages maintained upward pressure, remaining slow to adjust downward.
Chand noted that while Fiji is experiencing a broad disinflation driven by tradables, persistent inflation remains in selected service and regulated categories. Consequently, headline inflation is expected to remain subdued, yet households may continue to face cost pressures in areas where competition is limited and service delivery prices remain elevated.
In terms of domestic fuel prices, Chand anticipated they would stay firm in the first quarter of 2026 due to reduced global refined production and the weakening of the US dollar, particularly affecting diesel and kerosene. Lighter fuels like motor spirit and premix are projected to begin rising from the second quarter, albeit within a context of broader uncertainty.
Looking ahead to 2026, the balance of inflation risks appears skewed to the upside, with year-end inflation forecasted at 2.8% and an average inflation rate estimated at 1.4%. This outlook suggests a cautiously optimistic path forward as Fiji navigates through its economic landscape, aiming to strike a balance between the opportunities presented by disinflation and the challenges posed by persistent inflation in key sectors.
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