{
  "title": "IMF Executive Board Concludes 2023 Article IV Consultation with Fiji",
  "publication": "IMF News, June 28, 2023",
  "sourceUrl": "https://www.imf.org/en/news/articles/2023/06/28/pr23248-fiji-imf-executive-board-concludes-2023-article-iv-consultation",
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  "summary": "On June 1, 2023, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation [1] with Fiji and considered and endorsed the staff appraisal without a meeting on a lapse-of-time basis.",
  "publishDate": "2023-06-28",
  "sections": [
    {
      "heading": "Overview and timing",
      "content": "- Executive Board concluded the Article IV consultation with Fiji on June 1, 2023, and considered and endorsed the staff appraisal without a meeting on a lapse-of-time basis.\n- Press Release No. 23/248 dated June 28, 2023."
    },
    {
      "heading": "Near-term macroeconomic developments and outlook",
      "content": "- 2022 rebound driven by rapid tourism recovery: tourist arrivals in 2022 reached 71 percent of 2019 levels, yielding GDP growth of an estimated 16.0 percent in 2022.\n- Inflation: averaged 4.3 percent in 2022 and fell to 2 percent year-on-year in March 2023.\n- Current account deficit: 17.5 percent of GDP in 2022.\n- Fiscal outcomes: overall fiscal deficit declined slightly to 12.2 percent of GDP in FY2022 from 13.6 percent in FY2021.\n- Public debt-to-GDP: 87 percent end-2022.\n- Banking sector: ratio of non-performing loans to total loans stabilized recently but remains well above pre-pandemic levels.\n- Growth projections:\n  - Real GDP growth projected at 7.5 percent in 2023 and 3.9 percent in 2024.\n  - Trend growth estimated at around 3¼ percent."
    },
    {
      "heading": "Executive Board assessment — key findings",
      "content": "- Recovery: With the rapid rebound in tourism, the economy is experiencing a strong recovery.\n- Risks to growth:\n  - Demand-side risk: global outlook.\n  - Supply-side risks: capacity constraints and price competitiveness.\n- Inflation risks: although inflation eased since end-2022, risks are tilted to the upside because of strengthening domestic demand, growing wage pressures, and volatile global commodity prices.\n- Fiscal vulnerability: while the risk of debt distress is currently moderate, high debt levels leave Fiji vulnerable to future shocks with little fiscal space to respond.\n- Monetary and external policy:\n  - Need to shift monetary policy toward a more neutral stance to manage inflation and foreign reserve pressures.\n  - Recommendation to reverse pandemic-era exchange restrictions and capital flow management measures and to gradually phase out long-standing restrictions on current transactions (an exchange restriction subject to approval under Article VIII, Section 2(b) of the Fund’s Articles of Agreement).\n- Financial sector: soundness remains strong exiting the pandemic, but supervision should be reinforced; monitor NPLs and follow up on 2018 Financial Sector Stability Review recommendations.\n- Medium-term growth: hinges on implementing a well-designed and comprehensive growth strategy to boost diversification, domestic value-added in tourism, and address skilled labor shortages.\n- Climate plans: addressing implementation challenges of climate adaptation and mitigation plans requires increased efforts and financing; accelerate renewable energy investments to diversify energy sources and reduce external imbalances."
    },
    {
      "heading": "Policy recommendations (staff)",
      "content": "- Fiscal\n  - Use the upcoming budget to begin rebuilding fiscal space and reducing vulnerability.\n  - Set a fiscal rule — for example, an anchor based on debt-to-GDP.\n  - Pursue a front-loaded consolidation relying mostly on a comprehensive tax reform strategy which raises revenue, simplifies the tax system, and enhances efficiency.\n  - Accompany revenue mobilization with increased spending on inclusion (including targeted transfers to offset any impact of tax hikes on low-income households) and growth-enhancing reforms (such as cutting red tape).\n  - Maintain disciplined spending and gradually re-orient expenditures to boost growth, enhance resilience, and promote inclusion.\n  - Closely monitor and address fiscal risks, including contingent liabilities related to financially weak public companies.\n- Monetary and external\n  - Shift monetary policy toward a more neutral stance as the output gap narrows.\n  - Reverse tightening of exchange restrictions and capital flow management measures introduced at the pandemic onset.\n  - Gradually phase out long-standing restrictions on current transactions.\n- Financial sector\n  - Closely monitor NPLs and enhance efforts to address them.\n  - Strengthen the financial supervision framework and follow up on recommendations related to corrective action, bank recovery, coordination with home authorities, and bank resolution.\n- Structural and labor market\n  - Implement pro-growth reforms to improve the business climate, encourage private investment, and enable diversification within and beyond tourism.\n  - Increase domestic value-added in tourism to promote agriculture and rural development, job creation, and inclusion.\n  - Enhance training, education, and health care programs to bolster skilled labor supply; consider sector-specific immigration to address skill shortages.\n  - Reduce the overall cost of doing business to attract private and foreign investment.\n- Climate\n  - Intensify efforts with development partners and the private sector to mobilize financing, strengthen implementation capacity, and improve investment management for climate adaptation and mitigation."
    },
    {
      "heading": "Key quantitative projections and indicators (selected)",
      "content": "- Real GDP: -17.0 (2020), -5.1 (2021), 16.0 (2022), 7.5 (2023 proj.), 3.9 (2024 proj.), 3.7 (2025 proj.), 3.5 (2026 proj.), 3.3 (2027 proj.), 3.1 (2028 proj. as table continues).\n- Consumer prices (average): -2.6 (2020), 0.2 (2021), 4.3 (2022), 2.5 (2023 proj.).\n- Central government overall balance (percent of GDP): -12.9 (2020), -14.1 (2021), -10.4 (2022), -6.9 (2023 proj.), -6.0 (2024 proj.), -5.8 (2025 proj.), -5.6 (2026 proj.), -5.4 (2027 proj.), -5.3 (2028 proj.).\n- Central government debt (percent of GDP): 71.1 (2020), 92.4 (2021), 87.2 (2022), 84.6 (2023 proj.), 85.1 (2024 proj.), 86.0 (2025 proj.), 86.7 (2026 proj.), 87.1 (2027 proj.), 87.3 (2028 proj.).\n- Current account balance (percent of GDP): -13.6 (2020), -16.0 (2021), -17.5 (2022), -10.7 (2023 proj.), -9.6 (2024 proj.), -8.8 (2025 proj.), -8.3 (2026 proj.), -7.7 (2027 proj.), (2028 proj. continues).\n- Trade balance (percent of GDP): -14.6 (2020), -22.0 (2021), -33.2 (2022), -29.9 (2023 proj.), -28.8 (2024 proj.), -27.8 (2025 proj.), -26.9 (2026 proj.), -25.9 (2027 proj.), -25.1 (2028 proj.).\n- Services balance (percent of GDP): -1.9 (2020), -5.2 (2021), 11.9 (2022), 16.2 (2023 proj.), 16.6 (2024 proj.), 16.9 (2025 proj.), 16.8 (2026 proj.), 16.7 (2027 proj.).\n- Gross official reserves (in months of prospective imports): 6.2 (2020), 5.8 (2021), 5.5 (2022), 4.9 (2023 proj.), 4.5 (2024 proj.), 4.4 (2025 proj.).\n- Exchange rate, average (FJD/USD): 2.17 (2020), 2.07 (2021), 2.20 (2022), (2023 proj. continues).\n- GDP at current market prices (in millions of Fiji dollars): 9,710 (2020), 8,896 (2021), 10,844 (2022), 12,047 (2023 proj.), 12,886 (2024 proj.), 13,717 (2025 proj.), 14,601 (2026 proj.), 15,572 (2027 proj.), 16,577 (2028 proj.).\n- GDP at current market prices (in millions of U.S. dollars): 4,477 (2020), 4,296 (2021), 4,926 (2022), 5,558 (2023 proj.), 5,925 (2024 proj.), 6,277 (2025 proj.), 6,630 (2026 proj.), 7,002 (2027 proj.), 7,381 (2028 proj.).\n- GDP per capita (in U.S. dollars): 4,970 (2020), 4,740 (2021), 5,403 (2022), 6,060 (2023 proj.), 6,422 (2024 proj.), 6,762 (2025 proj.), 7,129 (2026 proj.), 7,488 (2027 proj.), 7,849 (2028 proj.).\n\nInternational Monetary Fund — Press Release No. 23/248 (June 28, 2023): IMF Executive Board Concludes 2023 Article IV Consultation with Fiji.\n\n---\n\n\n References\n\n- https://www.imf.org/-/media/images/imf/bios/imfboard.jpg\n- The Executive Board\n- Republic of Fiji and the IMF\n- IMF Policy Advice -- A Factsheet\n- Press Releases\n- PRESS CENTER\n- Article VIII, Section 2(b) of the Fund’s Articles of Agreement\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2023/06/28/pr23248-fiji-imf-executive-board-concludes-2023-article-iv-consultation"
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    "Published: June 28, 2023",
    "Executive Board concluded the Article IV consultation with Fiji on June 1, 2023, and considered and endorsed the staff appraisal without a meeting on a lapse-of-time basis.",
    "Press Release No. 23/248 dated June 28, 2023.",
    "2022 rebound driven by rapid tourism recovery: tourist arrivals in 2022 reached 71 percent of 2019 levels, yielding GDP growth of an estimated 16.0 percent in 2022.",
    "Inflation: averaged 4.3 percent in 2022 and fell to 2 percent year-on-year in March 2023.",
    "Current account deficit: 17.5 percent of GDP in 2022.",
    "Fiscal outcomes: overall fiscal deficit declined slightly to 12.2 percent of GDP in FY2022 from 13.6 percent in FY2021.",
    "Public debt-to-GDP: 87 percent end-2022.",
    "Banking sector: ratio of non-performing loans to total loans stabilized recently but remains well above pre-pandemic levels.",
    "Growth projections:",
    "Recovery: With the rapid rebound in tourism, the economy is experiencing a strong recovery.",
    "Risks to growth:",
    "Inflation risks: although inflation eased since end-2022, risks are tilted to the upside because of strengthening domestic demand, growing wage pressures, and volatile global commodity prices.",
    "Fiscal vulnerability: while the risk of debt distress is currently moderate, high debt levels leave Fiji vulnerable to future shocks with little fiscal space to respond.",
    "Monetary and external policy:",
    "Financial sector: soundness remains strong exiting the pandemic, but supervision should be reinforced; monitor NPLs and follow up on 2018 Financial Sector Stability Review recommendations.",
    "Medium-term growth: hinges on implementing a well-designed and comprehensive growth strategy to boost diversification, domestic value-added in tourism, and address skilled labor shortages.",
    "Climate plans: addressing implementation challenges of climate adaptation and mitigation plans requires increased efforts and financing; accelerate renewable energy investments to diversify energy sources and reduce external imbalances.",
    "Fiscal",
    "Monetary and external",
    "Financial sector",
    "Structural and labor market",
    "Climate",
    "Real GDP: -17.0 (2020), -5.1 (2021), 16.0 (2022), 7.5 (2023 proj.), 3.9 (2024 proj.), 3.7 (2025 proj.), 3.5 (2026 proj.), 3.3 (2027 proj.), 3.1 (2028 proj. as table continues).",
    "Consumer prices (average): -2.6 (2020), 0.2 (2021), 4.3 (2022), 2.5 (2023 proj.).",
    "Central government overall balance (percent of GDP): -12.9 (2020), -14.1 (2021), -10.4 (2022), -6.9 (2023 proj.), -6.0 (2024 proj.), -5.8 (2025 proj.), -5.6 (2026 proj.), -5.4 (2027 proj.), -5.3 (2028 proj.).",
    "Central government debt (percent of GDP): 71.1 (2020), 92.4 (2021), 87.2 (2022), 84.6 (2023 proj.), 85.1 (2024 proj.), 86.0 (2025 proj.), 86.7 (2026 proj.), 87.1 (2027 proj.), 87.3 (2028 proj.).",
    "Current account balance (percent of GDP): -13.6 (2020), -16.0 (2021), -17.5 (2022), -10.7 (2023 proj.), -9.6 (2024 proj.), -8.8 (2025 proj.), -8.3 (2026 proj.), -7.7 (2027 proj.), (2028 proj. continues).",
    "Trade balance (percent of GDP): -14.6 (2020), -22.0 (2021), -33.2 (2022), -29.9 (2023 proj.), -28.8 (2024 proj.), -27.8 (2025 proj.), -26.9 (2026 proj.), -25.9 (2027 proj.), -25.1 (2028 proj.).",
    "Services balance (percent of GDP): -1.9 (2020), -5.2 (2021), 11.9 (2022), 16.2 (2023 proj.), 16.6 (2024 proj.), 16.9 (2025 proj.), 16.8 (2026 proj.), 16.7 (2027 proj.).",
    "Gross official reserves (in months of prospective imports): 6.2 (2020), 5.8 (2021), 5.5 (2022), 4.9 (2023 proj.), 4.5 (2024 proj.), 4.4 (2025 proj.).",
    "Exchange rate, average (FJD/USD): 2.17 (2020), 2.07 (2021), 2.20 (2022), (2023 proj. continues).",
    "GDP at current market prices (in millions of Fiji dollars): 9,710 (2020), 8,896 (2021), 10,844 (2022), 12,047 (2023 proj.), 12,886 (2024 proj.), 13,717 (2025 proj.), 14,601 (2026 proj.), 15,572 (2027 proj.), 16,577 (2028 proj.).",
    "GDP at current market prices (in millions of U.S. dollars): 4,477 (2020), 4,296 (2021), 4,926 (2022), 5,558 (2023 proj.), 5,925 (2024 proj.), 6,277 (2025 proj.), 6,630 (2026 proj.), 7,002 (2027 proj.), 7,381 (2028 proj.).",
    "GDP per capita (in U.S. dollars): 4,970 (2020), 4,740 (2021), 5,403 (2022), 6,060 (2023 proj.), 6,422 (2024 proj.), 6,762 (2025 proj.), 7,129 (2026 proj.), 7,488 (2027 proj.), 7,849 (2028 proj.).",
    "[https://www.imf.org/-/media/images/imf/bios/imfboard.jpg](https://www.imf.org/-/media/images/imf/bios/imfboard.jpg)",
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    "[Article VIII, Section 2(b) of the Fund’s Articles of Agreement](https://www.imf.org/external/pubs/ft/aa/index.htm)",
    "[https://www.imf.org/en/home](https://www.imf.org/en/home)"
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