WESTPAC Fiji is slashing its 2026 growth forecast for Fiji to 2 per cent from its initial 3.3 per cent forecast before the Israeli-US war on Iran erupted on February 28.In its latest Westpac Wave, the bank said Fiji’s economy faces significant downside risks from the ongoing Middle East conflict, leading to higher fuel prices, transport and shipping costs plus a higher import bill.
“Any potential disruptions to fuel supply could meaningfully hamper domestic economic activity, which is already facing significant strain from higher prices,” Westpac Fiji’s senior economist Shamal Chand said.
“The tourism sector faces elevated risks from higher jet fuel prices and, in a more severe scenario, the unavailability of jet fuel that could ground long-haul flights.
“High fuel prices and their second round effects transmitted through other channels, are expected to add materially to intermediate costs across all economic sectors.
“After factoring in these risks, we have downgraded Fiji’s growth forecast for 2026 to 2.0 per cent, from our pre conflict outlook of 3.3 per cent.”
The bank is forecasting growth to rebound to 3.2 per cent in 2027, based on its assumption that the Strait of Hormuz will be effectively closed for around eight weeks, through to late April, followed by a slow and incomplete reopening and full normalisation not expected until late 2026 to mid 2027. Tourism ‘flat’Against the backdrop of the ongoing conflict, Westpac Fiji is expecting Fiji’s major economic driver tourism to slow despite strong growth in the first quarter of the year.
“We expect visitor arrivals to remain broadly flat in 2026, despite a strong start to the year.
“While tourism sector momentum was strong in early 2026, the outlook for the remainder of the year is becoming more challenging.
“Elevated jet fuel prices, coupled with risks of fuel supply disruptions linked to the ongoing Middle East conflict, present significant headwinds for airline operations and the wider tourism sector.
“These pressures have already begun to affect flight capacity. “Fiji Airways has announced the temporary suspension of four services across two international routes, including selected services on the Nadi–Brisbane route from late April and Tuesday services on the Dallas–Nadi route between May and mid June.
“With fuel remaining its single largest cost, the airline is preparing for a prolonged period of elevated operating expenses.
“Management has signalled a cautious approach, focusing on efficiency gains, route optimisation, and prioritising core Australia and New Zealand markets, while seeking to limit fare increases where possible.
“The national airline is expected to face higher operating costs, which will weigh on its margins.
“The national airline may pursue further route consolidation if access to jet fuel at offshore airports becomes constrained, as countries increasingly prioritise domestic supply.”
With Fiji’s major source markets accounting for around 82–90 per cent of total arrivals, the bank is forecasting tourist arrivals for 2026 to be “flat”.
