Economic growth for Fiji this year is now revised downwards from the 3 percent forecast at the end of last year to 1.5 percent, with downside risks remaining elevated, and inflation is expected to stand at more than 6 percent.
This assessment of the country's economic growth rate revised downwards, has been made by the Macroeconomic Committee after taking the global and local factors into account.
While speaking at the State of the Fijian Economy Dialogue organised by Dialogue Fiji, Reserve Bank of Fiji Governor and Chairman of the Macroeconomic Committee, Ariff Ali says we are in period of uncertainty and volatility.
Ali says Fiji's debt to Gross Domestic Product ratio stands at 84 percent, and government expenditure has increased to $4.8 billion.
The RBF Governor says there are many factors that need to be considered urgently that are affecting us, which include the Ease of Doing Business in Fiji, the crime rate, drugs and HIV.
Ali says all these issues affect people and he is also concerned that the driver of the economy, tourism will be affected by some of these factors if nothing is done.
The assessment says that while Government has announced targeted support measures and is expected to maintain these in the 2026-2027 National Budget, given limited fiscal space, the revised growth outlook assumes that Government expenditure will remain at a similar level.
Ali says global risks have risen sharply in recent months, driven by escalated conflict in the Middle East.
As a result, oil prices have climbed steeply since February.
This has added to an already uncertain global environment shaped by shifting trade policies and geopolitical tensions.
In particular, concerns over shipping disruptions through the Strait of Hormuz, a critical route for global oil and fertiliser, have affected economic activity across many sectors.
At the same time, rising global prices for food and fertiliser have intensified inflationary pressures and heightened food security risks, particularly for net importing countries such as Fiji.
For Fiji, the global developments continue to be felt through several channels.
Higher fuel prices increase production and transportation costs, reduce business profits and output, and raise consumer prices, thereby reducing household spending power.
Collectively, these factors are expected to weigh on overall economic activity.
Consumer prices have risen sharply in the past few months.
Latest data indicate that inflation rose to 3.9 percent in May, a significant turnaround from the -3.8 percent in September 2025.
Year-end inflation is now expected to exceed 6 percent, underpinned by high imported inflation, particularly through fuel and food prices and its second-round effects.
While remittances inflows registered strong growth so far, recent data on consumption activity is showing signs of easing as households adopt a more cautious approach to spending as they adjust to higher cost of living and rising economic uncertainty.
This shift is reflected in the latest Reserve Bank of Fiji Retail Sales Survey, where businesses project retail sales to grow by 2 percent in 2026, much lower than the 6.8 percent expected in the August 2025 survey.
While visitor arrivals remain supportive of economic activity, the pace of expansion has slowed, weakening one of the key drivers of growth.
Based on recent trends in arrivals, forward bookings, reduced flight frequencies, heightened concerns around energy security and tighter monetary conditions in key markets, including Australia, visitor arrivals are now expected to grow at a slower pace than previously anticipated.
Looking ahead, the economy is forecast to expand by 2.5 percent in 2027, and to converge to its longer-term trend of around 3 percent in 2028.
Over this period, the services sector, particularly tourism, is still anticipated to remain the main driver of growth, supported by contributions from the industrial and primary sectors.
Ali says the outlook for Fiji’s external sector remains closely linked to the current global environment, characterised by elevated imported inflation and heightened uncertainty.
Higher fuel import costs will lead to a widening of the merchandise trade deficit and result in a larger current account deficit over the forecast period.
The current account deficit is forecast to be financed through adequate foreign reserves, supported by Government external loan drawdowns.
As of today, RBF’s foreign reserve holdings stood at around $3.4 billion, enough to cover approximately 4.7 months of retained imports and are projected to remain adequate over the near to medium term.
Based on this announcement, some urgent decisions have to be made by the government.
The 2026/2027 National Budget will be delivered on June 26th.
