The Reserve Bank of Fiji has warned that rising global fuel prices are expected to drive inflation higher and weigh on economic activity in the near term.
According to the central bank, fuel and gas account for 6.9 per cent of the average household budget in Fiji, meaning about seven cents of every dollar spent by families goes toward these essentials. As global prices increase, households are likely to face higher transport and utility costs.
The broader economic impact is expected to be significant, as fuel is a key input across multiple sectors including transport, manufacturing, agriculture and retail.
Higher fuel costs typically translate into increased operating and freight expenses for businesses, which are often passed on to consumers.
The RBF noted that Fiji experienced a similar trend in 2022 when global crude oil prices remained above US$100 per barrel, pushing annual headline inflation to an average of 6.1 per cent.
Prior to the recent volatility, inflation was projected to range between 2.5 per cent and 3.0 per cent by year-end, but this outlook has now shifted upward.
Higher input costs are also expected to raise production expenses and dampen domestic demand, potentially slowing overall economic activity.
The central bank further cautioned that continued volatility in global fuel prices and heightened geopolitical tensions could affect travel demand and increase airfares, which may moderate visitor arrivals if conditions persist.
Looking ahead, the RBF said the balance of risks remains tilted to the downside, with global uncertainty and elevated oil prices likely to place upward pressure on inflation, constrain economic growth, and put downward pressure on foreign reserves.
