The Asian Development Bank (ADB) has updated its growth forecasts for Fiji for the years 2024 and 2025, citing a stronger-than-anticipated performance in tourism and increased government expenditures. Initially projected to grow by three percent, the ADB has now revised Fiji’s economic growth forecast to 3.4 percent in its September Outlook.
In April 2024, ADB believed that limited hotel 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, significantly surpassing earlier predictions.
Additionally, where fiscal spending was expected to be limited starting from fiscal year 2024, the government has now planned a 10.9 percent rise in expenditures for fiscal year 2025, which includes salary increases for civil servants. This increased fiscal stimulus, along with a robust tourism sector, is expected to enhance the growth outlook.
The ADB also noted that fiscal deficits have decreased, resulting in lower government spending relative to revenue. Consequently, the fiscal deficit for FY 2024 is anticipated to narrow to four percent of GDP, down from an earlier estimate of 4.8 percent.
The government aims to reduce the debt-to-GDP ratio to 60 percent by FY 2040, a decrease from 78 percent in FY 2024. To meet this objective, plans are underway to boost revenues through heightened demand, improved tax compliance and collection, and a review of tax exemptions and incentives to manage rising expenditures.
Additionally, inflation forecasts for 2024 have been revised upward due to higher-than-expected price increases. The ADB indicated that rising food and fuel costs contributed to consumer inflation in the first half of 2024, and anticipated increases in minimum wages and civil servant salaries could elevate prices toward year-end. Nevertheless, a projected decline in global prices next year may help stabilize inflation, keeping the 2025 inflation forecast unchanged.