IMF Staff Completes 2021 Article IV Mission to Fiji

IMF News, October 8, 2021

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Real GDP contracted by 15.7 percent in 2020.
Real GDP is expected to contract by another 4 percent in 2021.
Economic activity has been hard hit by the sudden stop in tourism, effects on related sectors, and by domestic lockdowns in response to local outbreaks in 2020 and 2021.
A gradual recovery is expected to begin late this year and into 2022 as vaccinations continue, regional borders begin to open and international travel resumes, but risks remain high.

Fiscal deficit reached 13.7 percent of GDP in FY20-21.
Fiscal deficit is projected to remain at about that level for FY21-22.
Public debt is projected to rise to nearly 90 percent of GDP by the end of the current fiscal year.
Year-on-year consumer price inflation reached -2.8 percent at end-2020.
The external balance of payments has been cushioned by strong growth in inward remittances and an influx of financing flows from multilateral and bilateral creditors.

Risks to the outlook are skewed to the downside.
Vulnerabilities have been exacerbated by diminished fiscal space due to large government budget deficits and rising public debt from the fiscal response to the COVID-19 pandemic.
Contingent liabilities have surged during the pandemic as the government extended loan guarantees to state enterprises.
Fiji remains highly vulnerable to the impacts of climate change and natural disasters—particularly the effects of tropical cyclones.
Recovery and medium-term outlook hinge on a recovery of tourism; the speed and extent to which pre-pandemic tourism patterns will reestablish themselves remain unclear.

Continue support in the near term as Fiji reopens and emerges from the pandemic.
As economic activity accelerates, implement a phased fiscal consolidation to:
- Put public finances on a more sustainable footing.
- Place public debt on a downward trajectory.
Bolster public revenues in a growth-friendly manner.
Exercise expenditure restraint.
Continue sound public debt management.

Continue emphasis on macro-structural reforms to support the recovery and enhance prospects for diversification.
The recent passage of the new Investment Act is noted as a welcome step.
Important opportunities remain to improve Fiji’s competitiveness and business environment.
A key priority is to tackle the gender gap in labor force participation to boost potential growth and make it more inclusive.

An IMF team led by Mr. Todd Schneider conducted a virtual mission to Fiji during September 27 to October 8, 2021 to undertake discussions for the 2021 Article IV Consultation.
The team held discussions with the Minister of Economy, the Minister of Commerce Trade Tourism and Transport, the Governor of the Reserve Bank of Fiji, other government officials, development partners, and private sector representatives.
The views expressed are those of IMF staff and do not necessarily represent the views of the IMF’s Executive Board. Based on the preliminary findings of this mission, staff will prepare a report that, subject to management approval, will be presented to the IMF's Executive Board for discussion and decision.

Press Release No. 21/289 — IMF Communications Department, October 7, 2021