The Asian Development Bank (ADB) has revised Fiji’s growth forecasts for 2024 and 2025 upwards due to stronger-than-expected tourism and increased government spending.
In April, it forecasted Fiji’s economy to grow by three per cent but has upgraded this to 3.4 per cent in ADB’s September Outlook released recently.
The ADB said in April 2024, the assumption was that limited hotel room inventory and high accommodation costs would slow tourism uptake.
“However, visitor arrivals in the first 7 months of 2024 grew by 6.7 per cent compared to the same period in 2023, doubling initial projections,” ADB stated.
“Fiscal spending was earlier projected to be restrained from fiscal year 2024 (FY2024 ended 31 July 2024) onwards.”
“The government now plans a 10.9 per cent increase in expenditure in FY2025, including salary increases for civil servants.”
“This augmented fiscal stimulus, combined with a resilient tourism sector, is anticipated to support the growth outlook.”
The ADB stated fiscal deficits narrowed, and that has resulted in lower government spending compared to revenue.
This led to a narrower fiscal deficit in FY 2024, equivalent to four per cent of GDP, instead of the earlier forecast of 4.8 per cent.
“The government aims to reduce the debt-to-GDP ratio to 60.0 per cent by FY2040 from 78.0 per cent in FY2024,” it stated.
“To achieve the goal, the government plans to increase revenues driven by higher demand, improve tax compliance and collection, and review tax exemptions and incentives to offset rising expenditures.”
The ADB stated inflation forecasts for 2024 were also revised up due to higher-than-expected price increases.
“Rising food and fuel prices drove consumer inflation in (the first half of 2024). Higher minimum wages and civil servant pay will likely push prices up toward the end of the year.”
“An expected slowdown in global prices next year may help stabilise inflation, leaving the 2025 inflation projection unchanged.”
