The Asian Development Bank (ADB) has upgraded its growth projections for Fiji for the years 2024 and 2025, attributing this adjustment to stronger-than-anticipated tourism and heightened government expenditure. Initially, in April, the ADB forecasted a 3 percent growth for Fiji’s economy, but this has now been revised to 3.4 percent according to the September Outlook recently released.
The ADB had previously anticipated that a shortage of hotel accommodations and high lodging prices would hinder tourism growth. However, visitor numbers rose by 6.7 percent in the first seven months of 2024 compared to the same timeframe in 2023, significantly exceeding earlier expectations.
The report also highlighted the government’s plans for fiscal spending, which were initially expected to be constrained starting from fiscal year 2024. Now, the government intends to increase expenditure by 10.9 percent in FY2025, which includes salary hikes for civil servants. This enhanced fiscal stimulus, in combination with a strong tourism sector, is expected to bolster the growth outlook.
Additionally, the ADB noted that fiscal deficits have decreased, resulting in lower government spending relative to revenue. Consequently, a narrower fiscal deficit of 4 percent of GDP for FY2024 is anticipated, down from the previous forecast of 4.8 percent.
To further strengthen its financial position, the government aims to decrease the debt-to-GDP ratio to 60 percent by FY2040 from 78 percent in FY2024. This will be achieved by boosting revenues through increased demand, enhancing tax compliance and collection, and revising tax exemptions and incentives to counterbalance rising expenditures.
The ADB has also revised its inflation forecasts for 2024 due to higher-than-expected price hikes. Increased costs for food and fuel have contributed to rising consumer inflation, and the implementation of higher minimum wages and civil servant salaries is likely to further drive prices up toward the end of the year. However, an anticipated reduction in global prices next year may help to stabilize inflation, leaving the projection for 2025 unchanged.