Fiji economic survey: Low growth the new normal?

Abstract

This article reviews the performance of the Fijian economy from 2015 to 2019. After several years of decent growth (around 5%), GDP growth fell to as low as 0.5% in 2019. Earlier hopes that a ‘new normal’ of GDP growth of around 5% per annum had been established have faded. The principle reason for this, it is argued, is a lack of business confidence, which is associated with the 2018 elections, but more fundamentally with a lack of faith in Fiji's political system. At the same time, the government has also been forced to embark on a course of fiscal consolidation, as announced in the 2019–2020 National Budget, due to disappointing revenue collections and undisciplined expenditure in earlier years. The banking sector is hamstrung by a lack of liquidity. This article is written to understand the Fijian economy pre-COVID-19, but with the sharp downturn in economic growth in particular due to the impact of the COVID-19 virus on tourism—Fiji's most important sector—and no room for fiscal expansion, growth prospects in Fiji are currently not bright. An improved medium-term outlook will require greater confidence (both political and economic) to increase investment, both foreign and domestic. Reforms to reduce the costs of doing business will also help.