- The recovery of the Fijian economy has continued, with growth estimated at around 3¾ percent in 2024, and expected to moderate to around 3 percent in 2025.
- Rebuilding fiscal buffers is a priority, to increase policy space to cope with future macroeconomic shocks. With the economy running at close to capacity, monetary policy should be gradually normalized.
- Structural reforms are critical for boosting potential growth and macroeconomic resilience. Priorities include utilities reform, upgrading the transport network and digital connectivity, and increasing as well as upskilling the labor force.
Washington, DC: An International Monetary Fund (IMF) team led by Mr. Alasdair Scott held discussions with the Fijian authorities and other stakeholders in Suva and Nadi from March 12 to 25, 2025. At the conclusion of the visit, Mr. Scott issued the following statement:
"The recovery has continued. Growth is likely to ease in 2025, to around 3 percent, as tourist arrivals revert to pre-pandemic trends and increased regional price competition lowers average earnings per tourist per night. Over the medium term, under current policies, GDP growth is expected to settle slightly below the pre-pandemic trend of 3.3 percent, supported by gradually rising hotel capacity and tourism diversification.
"Risks going forward are tilted to the downside. The global economy could suffer from increased trade frictions, disruptions to FDI, and higher global inflation. The direct effects on Fiji from higher tariffs on other countries are likely to be small. But there is potential for a slowdown in external demand, especially in terms of tourist arrivals, goods exports, and remittances. Fiji remains highly vulnerable to natural disasters and faces implementation challenges for planned adaptation measures. On the upside, greater structural reform momentum--particularly to modernize infrastructure, enhance human capital, and create a business-friendly environment—would raise potential growth, strengthen public finances, and improve external sustainability.
"Good progress has been made over the past year to address important challenges. Fiscal consolidation has advanced, while on the structural front, delays in the approvals of worker permits have fallen. But public debt remains high. In addition, the current account deficit is projected to stabilize over the medium term at around 7 percent of GDP; with financial inflows projected to remain lower than before the pandemic, FX reserve coverage would decline.
"Policies need to address both near term and medium-term issues.
"Rebuilding fiscal buffers should be a priority. Fiscal policy should promote growth-friendly consolidation and a shift from current to capital spending. A primary surplus of around 2 percent of GDP by FY2030 is recommended, which would put the debt-to-GDP ratio on a clear downward path. The preferred composition of fiscal consolidation would include a combination of revenue mobilization and expenditure rationalization measures, while allowing for an increase in growth-enhancing spending. Reversals of past tax increases or further increases in the size of the government should be avoided.
"Monetary policy should be gradually adjusted to at least neutral levels, given that the economy now appears to be running at capacity overall. Pandemic-related current account exchange restrictions should be reversed now that economic conditions have normalized, along with a careful and gradual removal of the pandemic-related capital flow measures. Building on recent progress, the authorities should develop a plan to phase out the pre-pandemic current account exchange restrictions in a sequenced manner.
"The banking sector is profitable and solvent. Capital levels of all commercial banks remain adequate. However, the growth in unsecured consumer credit merits particularly close monitoring. Financial policies should be attentive to emerging credit risks. Over the past year, authorities have implemented various measures to meet remaining Financial Action Task Force recommendations, but challenges remain—Fiji should continue to tackle the vulnerabilities in its anti-money laundering and countering the financing of terrorism (AML/CFT) framework.
"Progress has been achieved in enhancing the business environment and addressing near-term constraints to growth, such as the launch of an online system to process worker and investor permits within thirty days and enhancing the National Single Window to facilitate business registration and to accelerate approvals of permits. However, a significant acceleration in structural reform momentum is needed to attract higher FDI and boost growth prospects over the medium term. Structural policy priorities include addressing ageing utilities' infrastructure; improving the transport network and digital connectivity; and mitigating the impact of migration and skilled labor shortages by investing in human capital, strengthening education and training and facilitating higher female labor force participation. Fiji's long-term growth prospects also depend on addressing the challenges posed by natural disasters and mobilizing additional climate financing.
"The team had fruitful discussions with the Deputy Prime Minister and Minister for Finance, Strategic Planning, National Development, and Statistics, Biman Prasad, the Governor of the Reserve Bank of Fiji, Ariff Ali, other senior government officials, development partners, and private sector representatives. The team would like to thank the Fijian authorities for their excellent cooperation and hospitality."
