Fiji’s post-pandemic economic rebound is losing momentum, with growth forecasts downgraded and tourist arrivals on the decline, according to the World Bank’s latest Pacific Economic Update.
The report, released on June 17, paints a sobering picture for the broader Pacific region, warning that a cocktail of global uncertainty, inflationary pressure, and waning external demand is dragging down growth across 11 Pacific Island Countries (PIC-11).
The region’s economic growth is projected to fall from 5.5 per cent in 2023 to just 2.6 per cent in 2025.
Fiji, the largest economy among the PIC-11, is at the centre of this slowdown, with its 2025 growth forecast downgraded to 2.6 per cent—a drop of 0.8 percentage points from earlier projections.
“The post-pandemic tourism surge that fuelled much of the region’s recovery has begun to taper off, and with it, so has the momentum that sustained growth,” the report notes.
Tourism losing steam
Tourism, Fiji’s economic lifeline, is showing signs of fatigue.
In 2024, tourist arrivals surpassed 2019 levels by 9 per cent, driven largely by strong visitation from Australia and New Zealand.
But in early 2025, arrivals dropped by 4 per cent, particularly from key markets like the US, Australia, and New Zealand.
This downturn threatens to erode confidence in the recovery of the East Asia and Pacific tourism corridor, which had been on an upward trajectory.
The global tourism outlook is now clouded by a projected weakening in economic growth and tightening household budgets abroad.
While other Pacific nations such as Palau and Samoa continue to benefit from delayed tourism rebounds and labour remittances, Fiji’s earlier gains may have peaked.
Economic headwinds mounting
Globally, economic headwinds are stiffening.
Trade growth is forecast to slow from 3.4 per cent in 2024 to just 1.6 per cent in 2025, amid escalating tariff wars and trade policy uncertainty.
The World Bank estimates global economic policy uncertainty in 2025 is 65 per cent higher than the average between 2020 and 2024.
For Fiji and its Pacific neighbours, this creates a risky environment.
As heavily trade- and aid-dependent nations, Pacific economies remain vulnerable to global volatility.
Inflation has eased, thanks in part to falling energy and food prices.
In Fiji, inflation rose from 2.3 per cent in 2023 to 4.5 per cent in 2024 due to VAT adjustments and higher import costs but is expected to settle between 3 and 4 per cent over the next two years.
Nevertheless, the lingering effects of past inflation continue to erode household purchasing power.
Poverty still a pressing issue
Fiji’s steady, albeit slower, growth is projected to gradually reduce the national poverty rate.
Using the World Bank’s upper-middle-income poverty threshold (US$6.85/day in 2017 PPP), poverty is expected to decline from 48.5 per cent in 2025 to 44.1 per cent by 2027.
However, the region’s progress on poverty reduction is uneven.
Vanuatu, for instance, is expected to see rising poverty rates due to the compounded effects of natural disasters, weak growth, and high food insecurity in provinces like Shefa.
The World Bank report notes that without higher sustained growth, income convergence with advanced economies will continue to stall.
Pacific per capita income, once approaching 25 per cent of developed country levels, is projected to stagnate at 20 to 22 per cent by 2030.
Fiscal tightrope
Fiji has made strides in fiscal consolidation, reducing its public debt from a pandemic-induced peak of 93 per cent of GDP in 2021 to 79.8 per cent in 2024.
The improvement has been driven by stronger tax revenues and expenditure reforms, including VAT increases and tighter wage controls.
Still, the fiscal deficit remains notable at 4 per cent of GDP in 2024 and is expected to widen slightly in 2025 due to higher public spending.
Officials hope ongoing reforms, such as zero-based budgeting and a review of tax exemptions, will help restore balance over the medium term.
Foreign reserves in Fiji remain robust, covering six months of imports, thanks to buoyant remittances and tourism earnings in recent years.
Labour mobility still a bright spot
One area where Fiji and the Pacific continue to see strong performance is labour mobility.
Remittances have surged, fuelled by expanded migration schemes in Australia and New Zealand.
In 2024, these flows helped narrow Fiji’s current account deficit from 15.5 per cent to 7 per cent of GDP.
The continuation and possible expansion of these schemes are vital to maintaining household income, supporting consumption, and easing labour market pressures at home.
Looking ahead
The World Bank’s outlook urges caution.
While global commodity prices are forecast to decline further, potentially reducing import bills, uncertainty remains a looming threat.
From tariff volatility to climate-induced disasters, Pacific nations must prepare for a more turbulent economic environment.
For Fiji, the path forward will depend on how well it can diversify beyond tourism, deepen economic reforms, and harness the economic potential of its people, particularly through strategies such as increasing female labour force participation.
