IMF Executive Board Concludes 2019 Article IV Consultation with Fiji

IMF News, March 20, 2020

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Press Release No. 20/91; finalized in January (reported March 20, 2020).
The IMF Executive Board concluded the Article IV consultation with Fiji, assessing developments through 2019 and providing policy advice for the medium term.
The impact of COVID-19 on Fiji’s GDP growth was not assessed in this report which was finalized in January.

Growth slowed sharply in 2019; growth is estimated to have reached about 1 percent in 2019.
Growth drivers in 2019: resilient tourism and remittances.
Outlook: GDP growth should pick up gradually as the private sector regains dynamism.
Inflation pressures: subdued.

Recent years (2017–18) saw relatively high growth amid rising external and fiscal imbalances; fiscal space is now at risk and external vulnerabilities remain significant.
Fiscal consolidation priorities:
- Reduce fiscal imbalances to rebuild buffers for natural disasters and to maintain public debt sustainability.
- Fiscal consolidation should focus on reining in current spending given limited scope for further revenue mobilization and the need for capital spending to improve climate resilience.
- A credible medium-term fiscal strategy is needed to place the debt-to-GDP ratio on a downward path.
External sector: external imbalances expected to narrow as policy support is withdrawn.

Directors assessed the stance of monetary policy as appropriate; continued focus should be on maintaining adequate foreign reserves.
Central bank recommendations:
- Continue to rely on the automatic stabilizing mechanism of the peg.
- Avoid financing the government.
- Strengthen operational independence.
- Gradually relax remaining exchange restrictions, with technical support from the Fund.
Financial stability priorities:
- Safeguard financial stability by upgrading supervision of nonbank financial institutions.
- Adopt the Credit Union Act.
- Closely monitor nonperforming loans.
- Continue strengthening the AML/CFT framework in line with FATF recommendations.

Directors welcomed authorities’ structural reform initiatives and encouraged:
- Sustained efforts to improve the business environment and foster private sector investment.
- Strengthening governance and aligning the investment regime with international best practices.
- Reforms to labor and product markets to boost female labor force participation and rationalize price controls.
- Upgrading the disaster risk management framework.
Tackling the gender gap in labor force participation was highlighted as a priority to boost potential growth and make growth more inclusive.

Directors noted the favorable medium-term growth outlook but stressed significant risks: rising fiscal and external imbalances, and natural disasters.
Emphasis on growth-friendly fiscal consolidation, protecting priority investments and social programs while rationalizing current spending.
Support for policies to boost potential growth and build resilience to weather-related shocks.

Quota: SDR 98.4 million
GDP per capita (2018): US$6,208
Nominal GDP (2018): US$5.5 billion
Real GDP growth:
- 2015: 4.7
- 2016: 2.5
- 2017: 5.4
- 2018: 3.5
- 2019: 1.0
- 2020 Proj.: 1.8
Consumer prices (average):
- 2015: 1.4
- 2016: 3.9
- 2017: 3.4
- 2018: 4.1
- 2019: 1.9
- 2020 Proj.: 2.0
Central government budget (percent of GDP):
- Revenue 2019: 25.4; 2020 Proj.: 25.7
- Expenditure 2019: 30.3; 2020 Proj.: 30.2
- Fiscal balance 2019: -4.9; 2020 Proj.: -4.5
- Public debt 2019: 47.8; 2020 Proj.: 50.3
Private sector credit:
- 2017: 13.9
- 2018: 14.9
- 2019: 7.0
- 2020 Proj.: 6.0
Current account balance (percent of GDP):
- 2015: -3.5
- 2016: -3.6
- 2017: -6.7
- 2018: -8.5
- 2019: -7.2
- 2020 Proj.: -6.9
Gross official reserves (in millions of U.S. dollars):
- 2015: 921
- 2016: 915
- 2017: 1,103
- 2018: 940
- 2019: 1,008
- 2020 Proj.: 1,038
GDP at current market prices (in millions of U.S. dollars):
- 2015: 4,682
- 2016: 4,930
- 2017: 5,353
- 2018: 5,537
- 2019: 5,526
- 2020 Proj.: 5,766
GDP per capita (in U.S. dollars):
- 2015: 5,386
- 2016: 5,621
- 2017: 6,050
- 2018: 6,223
- 2019: 6,176
- 2020 Proj.: 6,409

Source: IMF Executive Board Concluding Statement on the 2019 Article IV Consultation with Fiji (press release, March 20, 2020).