AFBC ANALYSIS : 26th Jul 2016

Fiji’s economic resurgence and its 2016-17 budget - Dev Policy

Matthew Dornan provides some insightful analysis on Fiji's 2016/17 budget for the Dev Policy Blog.
Photo: Real GDP Growth, Matt Dornan

— By Matthew Dornan

Speakers at the Pacific Update conference last week painted a rosy picture of the Fijian economy, with 2016 expected to be its seventh consecutive year of economic growth. This marks a reversal of fortunes for the regional hub. Following the 2006 coup, Fiji’s economy was in the doldrums. There was uncertainty regarding the future of agriculture in Fiji and the sugar sector in particular. Tourism had been damaged by political instability. There were concerns about the country’s foreign reserves. Private investment had collapsed. The economy was effectively kept on life support by the government during these years, with public expenditure supporting what meagre growth there was, along with the devaluation of the Fiji Dollar in 2009. The upsurge in economic growth and private sector since 2010 shows that Fiji has well and truly left that period behind. What is more, the continuation of high levels of private sector investment (Figure 1) – first seen in 2014 – point to an economic resurgence. That investment is a positive sign of times to come (see Rup Singh’s forward estimates here [ppt]).

GDP growth for the year is forecast to measure 2.4 percent (see Figure 2), notwithstanding the devastating cyclone earlier in the year. Tropical Cyclone Winston did not leave the Fiji economy unscathed, of course. The disaster is estimated to have caused damage valued at F$2.85 billion, equal to almost 30 percent of GDP. Forecasts of GDP growth in 2016 have declined as a result, from 3.5 percent to 2.4 percent. The April floods have also taken an economic toll. While these events had a devastating impact on the affected communities, and have adversely affected the agricultural sector, the impact on other economic sectors was less pronounced. The Suva-Nausori corridor, Fiji’s economic hub, was spared from the worst of the cyclone. So too was the tourism sector, Fiji’s most important source of foreign exchange. The tourism hub of Nadi/Denarau, as well as the Mamanuca islands and the Coral Coast, were not severely affected. Tourism arrivals have reached new highs in the last year. At the same time remittances from overseas, which constitute Fiji’s second most important source of foreign exchange, have served as a recovery mechanism, with an upsurge in remittance flows to affected areas. Inflation has picked up as a result of reconstruction activities, reaching 5.6 percent in May, but this is expected to be only temporary.

Read the full article.

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