In July, Fiji experienced a record-breaking number of tourist arrivals, bringing the total for the year to 545,487 visitors from January to July, which is a 6.7% increase compared to the same period in 2023. This surge in tourism highlights the sector’s strong influence on the domestic economy and has led the Reserve Bank of Fiji (RBF) to maintain a monetary policy rate of 2.5%.
The RBF reported that July alone saw 98,332 visitors, marking an all-time high for that month. The positive trends in aggregate demand are attributed to robust tourism, increased income levels, and incoming remittances. Additionally, indicators related to investment suggest a gradual increase in economic activity.
Financial conditions are favorable for growth, supported by high liquidity in the banking system, which stood at $2.2 billion at the end of August, along with historically low lending rates. Private sector credit also grew significantly, with an 11.6% increase in July.
Inflation reached its second peak of 2024 in July at 6.8%, largely driven by rising costs in food, non-alcoholic and alcoholic beverages, tobacco, transport, and housing utilities. However, as the impact of the 2023 VAT rate increase diminishes, inflation is expected to decrease to around 4.0% to 5.0% by the end of the year.
Foreign reserves are currently at approximately $3.7 billion as of late August, which is sufficient to cover six months of retained imports for goods and services, and they are projected to remain adequate in the medium term. The RBF plans to continue monitoring economic data and will adjust monetary policy as necessary.