The Asian Development Bank (ADB) has increased its growth forecasts for Fiji for 2024 and 2025, citing stronger-than-anticipated tourism and a rise in government spending as the main factors.
Earlier projections made in April estimated a three percent growth in Fiji’s economy, but this has been adjusted to 3.4 percent in the ADB’s September Outlook report.
Initially, the forecast for April 2024 suggested that limited hotel capacity and high accommodation costs would hinder tourism growth. However, visitor arrivals for the first seven months of 2024 surged by 6.7 percent compared to the same period in 2023, surpassing earlier expectations.
The ADB noted that fiscal spending was originally thought to be constrained starting from the fiscal year 2024, which ended on July 31, 2024. Nevertheless, the government is now anticipating a 10.9 percent increase in expenditure for fiscal year 2025, which includes salary raises for civil servants.
This increase in fiscal stimulus, alongside a robust tourism sector, is predicted to bolster the growth outlook. The ADB indicated that fiscal deficits have been narrowed, resulting in lower government spending relative to revenue. This has culminated in a narrower fiscal deficit for fiscal year 2024, now estimated at four percent of GDP, down from a previous forecast of 4.8 percent.
The government aims to reduce its debt-to-GDP ratio to 60 percent by fiscal year 2040, down from 78 percent in fiscal year 2024. To achieve this objective, the government plans to boost revenues through increased demand, improve tax compliance and collection, and reassess tax exemptions and incentives to counter rising expenditures.
Furthermore, the ADB has also adjusted its inflation forecasts for 2024 due to unexpectedly high price increases. Rising costs of food and fuel contributed to consumer inflation in the first half of 2024, while anticipated increases in minimum wages and civil servant salaries are likely to push prices higher towards the end of the year. However, an expected decline in global prices next year may help stabilize inflation, leaving the inflation forecast for 2025 unchanged.