The Fijian economy is projected to expand by 8.2 percent this year, an upgrade from the 8 percent growth expected earlier, and by the end of the year, visitor arrivals are expected to be 4 percent higher than 2019 and reach a new record of 930,165 visitors.
The Reserve Bank of Fiji says this means the post-pandemic economic recovery in Fiji is now complete as the economy has returned to the 2019 level of GDP.
The RBF says the upward revision reflects the exceptional recovery in the tourism industry as up to October this year, 772,172 tourists graced our shores, around 3 percent higher than the same period in 2019.
The RBF says the spillover of higher tourist arrivals increased consumption spending and boosted aggregate demand.
Investment spending has also been rising, although at a relatively gradual pace.
However in contrast, the natural resource sectors continue to show dismal performance and have been a drag on growth.
The Reserve Bank says sugar, mineral water, gold and the forestry sector outputs noted annual contractions so far into the year due to industry-specific supply side issues.
Over the medium term, economic growth is expected to return to trend.
The current capacity constraints in the tourism industry is expected to keep annual visitor arrivals growth at around 3 percent, slightly lower than the trend before the pandemic.
However, investment spending is expected to fast-track from next year due to more clarity on taxes and incentives, pent-up demand from the pandemic and continuous improvements in the local business environment.
As a result, the economy is projected to grow by 3.4 percent in 2024 and a further 3 percent in 2025 to 2026.
The services and industrial sectors are expected to be the leading drivers of growth while the primary sectors is expected to remain broadly flat.
Despite the positive outlook, there are downside risks. The global economic outlook remains fragile as it suffers from weak demand, slowdown in China, tight labour markets, rising commodity prices and elevated inflation.
Source: Reserve Bank of Fiji
Domestically, ongoing capacity constraints in the tourism industry, loss of skilled labour due to high emigration, increasing cost of doing business and the constant threat from natural disasters and climate change can easily disrupt the growth projections going forward.
Over the medium to long term, higher-than-trend growth is required to compensate for the lost economic outputs in 2020 to 2021 and to rebuild fiscal buffers for future economic shocks.
Fast-tracking structural reforms related to ease of doing business, improving capacity constraints in the tourism industry, addressing the push factors behind high emigration and raising productivity are key policy priorities for unlocking further growth potential. The next review of the GDP forecasts will be before the 2024-2025 National Budget.
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