The latest Westpac Wave Fiji Economic Update states that leading to uneven conditions across sectors halting Fiji’s economic recovery, they now downgrade their real Gross Domestic Product projection for 2021 to -4.2 percent from the 2.3 percent growth projected in April.
Westpac Fiji says this is based on the major assumption that international borders will remain closed throughout 2021, resulting in significant contraction in visitor arrivals and decline in all related sector of the economy.
Overall, the bank says the economic outlook remains highly uncertain.
Any recovery is determined in large part on how soon the second wave of COVID-19 infections is contained locally and the resumption of international tourism.
It says it is assumed that Fiji will achieve widespread vaccination of its target population and effectively contain the pandemic by the end of the year, hence substantially reduce new cases. However, the outlook is subject to considerable uncertainty.
Westpac Fiji says a more persistent pandemic, financial sector stress and any natural disaster could derail the recovery next year.
However it says with nationwide vaccination rollout gaining momentum, Fiji is expected to get the majority of the targeted population vaccinated by the end of the year.
Westpac Fiji says this coupled with the outcomes of the upcoming National Budget would reshape key parts of the economic landscape over the coming year.
It says they expect a much larger rebound in 2022 at this stage.
The bank says the COVID-19 vaccination rollout program provides some hopes for getting back on a growth track next year, and they now expect international borders to open post first quarter in 2022 with at least a travel bubble with Australia, New Zealand and the Pacific.
Westpac Fiji says based on those indications, they now project the Fijian economy to rebound by 14.5 percent in 2022, following a contraction of 2.4 percent this year.
They expect recovery across most sectors of the economy with major rebounds anticipated for accommodation and food services, net taxes, transport and storage, construction and real estate activities sector.
Westpac Fiji says the second wave of COVID-19 infections has rapidly increased in Fiji.
The report says the current outbreak remains primarily centred within the Lami-Suva-Nausori Containment Zone which happens to be the centre for economic activity in Fiji.
It says the Fijian Government has put in place various measures to contain the virus and although some restrictions have been relaxed to allow businesses to resume over the past weeks, the economic activity remains highly subdued.
The report says with hopes now on the 2021/22 National Budget that will play a major role in taking the economy forward, the Fiji National Budget is scheduled for release on the 16th of this month and is particularly important at the current juncture.
It says the bottom line for the upcoming budget would have to be to contain the COVID-19 pandemic in Fiji and its readiness for travel and tourism activity, preferably by early next year.
Westpac Fiji says the focus is expected to be job creation, particularly in tourism, unemployment benefits in terms of safety nets so long as the pandemic remains and the steps to fill the void of investment and consumption with a strategic and sustainable stimulus.
Fiji’s public finances have held up much better than earlier anticipated and Westpac expects the Budget to show smaller fiscal deficit (around 12% to 15% of GDP) compared to the 20.2 percent of GDP projected last year.
For the new fiscal year, however, it says the fiscal deficit is expected to be higher than the 5.0 percent target, particularly because the economy is no longer expected to rebound this year.
Additionally, to cater for the impact of the pandemic on Fiji, expenditure is expected to be propped up and revenue is still projected to be lower than anticipated earlier.
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