The Asian Development Bank (ADB) has increased its growth projections for Fiji for 2024 and 2025, attributing the adjustment to better-than-anticipated performance in the tourism sector and greater government expenditure. Initially, in April, the ADB had forecasted a three percent economic growth for Fiji, but this estimate has been raised to 3.4 percent in the September Outlook recently released.
In April, there were expectations that limited hotel availability and high accommodation costs would hinder tourism growth. However, visitor numbers for the first seven months of 2024 surged by 6.7 percent compared to the same period in 2023, exceeding earlier estimates.
Furthermore, it was initially expected that fiscal spending would be restricted following the fiscal year ending on July 31, 2024. Yet, the government’s new budget plan aims for a 10.9 percent increase in spending for fiscal year 2025, which includes salary hikes for public sector employees. This increased fiscal stimulus, alongside a robust tourism sector, is projected to bolster the economic outlook.
The ADB noted that fiscal deficits have decreased, leading to a situation where government spending is lower than its revenues. Consequently, the fiscal deficit for fiscal year 2024 is expected to be four percent of GDP, down from the previously estimated 4.8 percent.
Additionally, the government aims to lower the debt-to-GDP ratio to 60.0 percent by fiscal year 2040, compared to 78.0 percent in fiscal year 2024. To reach this target, strategies include enhancing revenue through increased demand, improving tax compliance and collection, and reassessing tax exemptions and incentives to manage rising expenses.
Inflation estimates for 2024 have also been updated upward due to unexpectedly high price increases. Rising costs for food and fuel have contributed to consumer inflation in the first half of 2024, with anticipated increases in minimum wages and public sector salaries likely driving prices higher later in the year. However, a potential decline in global prices next year may help stabilize inflation, keeping the inflation forecast for 2025 unchanged.