Westpac Fiji has cut its forecast for the country’s economic growth in 2026 to 2.0 per cent, down sharply from an earlier 3.3 per cent projection, citing heightened downside risks from the ongoing Middle East conflict that began on February 28. The bank’s latest Westpac Wave update warns that disruptions tied to the conflict — notably higher fuel, transport and shipping costs and a rising import bill — will dent activity across Fiji’s small, tourism-dependent economy.
“Any potential disruptions to fuel supply could meaningfully hamper domestic economic activity, which is already facing significant strain from higher prices,” Westpac Fiji senior economist Shamal Chand said in the report. He warned that elevated jet fuel costs and the risk of actual shortages present particular dangers to the tourism sector, which remains Fiji’s main growth engine.
The bank’s downgrade assumes a severe disruption to regional shipping lanes, forecasting the Strait of Hormuz will be effectively closed for roughly eight weeks through to late April, followed by a slow and incomplete reopening. Westpac’s base case sees full normalisation not occurring until late 2026 to mid‑2027. Even so, it expects growth to rebound to 3.2 per cent in 2027 once supply pressures ease.
The fallout is already visible in aviation. Fiji Airways has temporarily suspended four services across two international routes, the bank noted, including selected Nadi–Brisbane services from late April and Tuesday Dallas–Nadi flights between May and mid‑June. With jet fuel described as the carrier’s single largest cost, management has adopted a cautious stance — prioritising efficiency gains, route optimisation and core Australia and New Zealand markets while trying to limit fare rises. Westpac says the national airline could pursue additional route consolidation if jet fuel availability at overseas airports becomes constrained.
Westpac expects tourism momentum to slow despite a strong start to 2026, forecasting visitor arrivals to remain “broadly flat” for the year. The bank highlighted that Fiji’s primary source markets account for roughly 82–90 per cent of total arrivals, amplifying the sensitivity of visitation to international flight capacity and pricing. Higher operating costs for airlines, together with potential reductions in long‑haul capacity, are expected to weigh on tourism receipts and wider economic activity.
Beyond tourism, Westpac warns that higher fuel prices will have second‑round effects across the economy, adding materially to intermediate costs for businesses and lifting the domestic cost of living. For a small, import‑dependent economy that has only recently been recovering from the pandemic shock, these pressures could erode household purchasing power and slow investment and hiring.
This update marks a notable change from previous forecasts and signals rising near‑term risks for Fiji’s recovery path. While Westpac’s 2027 rebound projection offers some relief, the bank’s analysis underscores how external geopolitical shocks and global energy market volatility can swiftly alter prospects for Pacific island economies heavily reliant on tourism and imported fuels.
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