Fiji’s economic growth is expected to slow sharply this year as rising fuel prices, escalating geopolitical tensions and a softening tourism sector weigh on business activity and consumer spending, according to revised projections released by the Reserve Bank of Fiji and the Macroeconomic Committee.
The committee has cut its forecast for Fiji’s economic growth in 2026 to 1.5 per cent, down from the 3.0 per cent growth projected in November last year, citing a more challenging global environment and mounting domestic cost pressures.
The downgrade comes amid growing uncertainty in the international economy following conflict in the Middle East, rising oil prices and ongoing disruptions to global trade routes. The Reserve Bank noted that concerns over shipping through the Strait of Hormuz and higher global food and fertiliser prices are contributing to inflationary pressures and affecting economic activity across many sectors.
Inflation has emerged as one of the biggest concerns. Consumer prices rose 3.9 per cent in May, a dramatic turnaround from the 3.8 per cent deflation recorded in September 2025. The Reserve Bank now expects inflation to exceed 6 per cent by the end of 2026, driven largely by imported fuel and food costs and their broader impact on the economy.
Signs of slowing demand are already emerging. The latest Reserve Bank Retail Sales Survey found businesses now expect retail sales to grow by only 2.0 per cent this year, significantly below the 6.8 per cent growth anticipated in the August 2025 survey. The tourism sector, which has been a key driver of Fiji’s recovery, is also showing signs of moderation. Visitor arrivals grew 4.6 per cent in the first four months of the year, down from 7.0 per cent growth recorded to March, while April arrivals fell 0.8 per cent compared with the same month last year.
Despite the weaker outlook, some parts of the economy remain resilient. New investment lending surged 78.6 per cent to $532.7 million in the first four months of 2026, led by strong activity in real estate and construction. Construction-related imports rose 12.6 per cent, while private sector credit expanded 12.5 per cent, supported by ample liquidity in the banking system.
External pressures, however, continue to build. Fiji’s merchandise trade deficit widened 16.7 per cent to $1.27 billion in the first quarter as imports rose and exports declined. At the same time, businesses are facing higher fuel costs and increased electricity tariffs, both of which are expected to raise operating expenses and dampen confidence.
One bright spot remains remittances. Inward remittances rose 25.2 per cent to $561.7 million in the first four months of the year, helping lift net remittance inflows by 30.5 per cent. Foreign reserves remain robust at around $3.4 billion, sufficient to cover approximately 4.7 months of retained imports.
Looking ahead, the Reserve Bank expects growth to recover gradually to 2.5 per cent in 2027 before returning to its longer-term trend of around 3.0 per cent in 2028. However, officials cautioned that the duration and severity of current global pressures remain uncertain, leaving downside risks firmly in place.
