The Asian Development Bank (ADB) has updated its growth projections for Fiji for the years 2024 and 2025, citing stronger-than-expected performance in tourism and increased government investment. The ADB initially forecasted a 3 percent economic growth for Fiji in April, but this has now been raised to 3.4 percent in its September Outlook.
In its earlier projection, the ADB anticipated that limited hotel room availability and high accommodation prices would hinder tourism growth. However, visitor arrivals in the first seven months of 2024 increased by 6.7 percent compared to the same period in 2023, considerably surpassing initial expectations.
The ADB also noted that government fiscal spending was expected to be limited moving forward. Nonetheless, the government has announced a planned 10.9 percent expenditure increase for fiscal year 2025, which will include salary hikes for public sector employees. This financial boost, coupled with a strong tourism sector, is predicted to enhance the economic growth outlook.
The ADB reported improvements in fiscal deficits, resulting in decreased government spending relative to revenue. The fiscal deficit for fiscal year 2024 is now projected to be 4 percent of GDP, down from an earlier estimate of 4.8 percent.
Additionally, the government is targeting a reduction in the debt-to-GDP ratio from 78 percent in fiscal year 2024 to 60 percent by fiscal year 2040. To meet this objective, plans include increasing revenues through higher demand, improving tax compliance and collection, and reassessing tax exemptions and incentives to manage rising expenditures.
Inflation forecasts for 2024 have also been revised upward due to unexpected price increases. Rising food and fuel costs have contributed to consumer inflation in the first half of 2024, while anticipated increases in minimum wages and civil servant salaries could further elevate prices towards the end of the year. However, a projected slowdown in global prices next year might help stabilize inflation, keeping the 2025 inflation outlook unchanged.