Fiji’s inflation landscape underwent a notable transformation in 2025, marking a departure from extended price pressures to a phase dominated by broad disinflation and occasional deflation, according to Westpac’s latest economic report.
The February edition of the “Westpac Wave: Fiji Economic Update and Outlook” revealed that the year commenced with a headline inflation rate of 2.5 percent year-on-year. However, by February, inflation fell below zero and remained in negative territory for most of the year. The report highlighted that inflation reached its lowest point between August and October, dropping to approximately -3.5 to -3.4 percent before stabilizing at zero by December.
The annual average inflation rate for 2025 was recorded at 1.4 percent, with the primary downturn attributed to tradable goods rather than service sectors. Notably, prices for food and non-alcoholic beverages fell by an average of 3.3 percent, and transport costs decreased by about 4.8 percent. These declines were linked to lower global food prices, improvements in supply chains, and reduced fuel-related costs compared to previous years between 2022 and 2024.
As 2025 progressed, price stability was observed, indicating that the cycle of imported disinflation had largely drawn to a close. Nevertheless, the report underscored that some service-based categories continued to experience inflationary pressures. Specifically, prices for alcoholic beverages and tobacco increased by an average of 3.1 percent, with restaurant and hotel prices climbing by 2.9 percent, and miscellaneous goods and services rising significantly by 5.6 percent. This phenomenon was attributed to stronger demand from tourism, adjustments in margins, and the lagging nature of service costs compared to commodity-driven prices.
Looking into early 2026, January consumer price index data revealed that while headline inflation remained negative at -2.5 percent year-on-year (with an annual average of -1.8 percent), specific components were still exerting upward pressure. This included sluggish downward adjustments in alcoholic beverage prices.
Westpac noted that Fiji is facing a unique economic scenario of disinflation driven by tradable goods while grappling with persistent inflation in select service areas. Experts caution that households will continue to feel financial strain in sectors with limited competition.
In terms of future inflation forecasts, the bank expects domestic fuel prices to remain steady during the first quarter of 2026 due to reduced global production and a weak US dollar impacting diesel and kerosene significantly. Lighter fuel prices are anticipated to rise in the second quarter, although expected to be limited in extent. Overall, Westpac’s analysis suggests that inflation risks for 2026 may skew to the upside, with predictions of year-end inflation reaching 2.8 percent and an average inflation rate of 1.4 percent.
This outlook offers a mix of caution and optimism, as the economy navigates the complexities of inflation while finding stability in consumer prices across various sectors.
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