The Reserve Bank of Fiji (RBF) has announced a notable decrease in the country’s inflation rate, which has now dropped to -0.6 percent in June, down from 0.1 percent in May. This represents a significant improvement from the 6.7 percent recorded in June of the previous year. The decline is mainly attributed to falling prices in food and non-alcoholic beverages, transport, and housing and utilities, as explained by RBF Governor Ariff Ali.
Looking ahead, the taxation measures introduced in the 2025-2026 National Budget are anticipated to exert further downward pressure on consumer prices starting in August. However, Governor Ali has expressed caution regarding potential inflationary risks stemming from global uncertainty, particularly geopolitical tensions in the Middle East, which might disrupt commodity prices and increase freight costs.
On a more positive note, other economic indicators are showing encouraging trends. The cane crushing season has started successfully, with an increase in cane and sugar production observed over the first six weeks compared to the previous year, although overall volumes still fall below historical averages. Ali noted that the domestic resource-based sectors, including mahogany, sawn timber, woodchip, and mineral water production, have performed well in the first half of the year.
Tourism data presented a mixed picture, with a slight annual drop of 0.8 percent in visitor arrivals to June, but the month of June itself saw a modest year-on-year increase of 0.1 percent, indicating a third consecutive month of improvement. Visitors from New Zealand and the United States have increased, although numbers from Australia, the largest market, continue to drop.
Strength in consumer spending remains evident, reflected in increased VAT collections, new consumption loans, and vehicle registrations, all underpinned by rising incomes and stable remittance inflows. However, investment and construction indicators show a slower recovery pace, with the high cost of business and regulatory challenges hampering momentum.
The RBF highlighted that liquidity in the banking sector remains robust, at $2.2 billion as of July 30, with the low interest rate environment supporting private sector credit. While the domestic outlook appears broadly positive, the RBF will continue to monitor global developments carefully and adjust policies as necessary, with the next review anticipated in late August.
In summary, despite challenges from the global economic landscape, Fiji’s economy shows signs of resilience, supported by positive domestic developments and effective fiscal measures.
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