End-of-Mission press releases include statements of IMF staff teams that convey preliminary findings after a visit to a country. The views expressed in this statement are those of the 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.
- Economic activity has been hard hit by the effects of the COVID-19 pandemic-both through the sudden stop in tourism and the effects on related sectors, and by domestic lockdowns in response to local outbreaks in 2020 and 2021.
- Real GDP contracted by 15.7 percent in 2020 and is expected to contract by another 4 percent in 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.
Washington, DC: An International Monetary Fund (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. At the conclusion of the visit, Mr. Schneider issued the following statement.
“The impact of the pandemic on Fiji has been severe. Real GDP contracted by an estimated 15.7 percent in 2020 and is projected to contract by a further 4 percent in 2021 in the wake of the Delta variant outbreak, local lockdowns, and protracted closure of the border. The fiscal deficit reached 13.7 percent of GDP in FY20-21 and is projected to remain at about that level for FY21-22, with an accompanying rise in public debt 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 as the fiscal response to the COVID-19 pandemic has resulted in large government budget deficits and an accompanying rise in public debt. Contingent liabilities have also surged during the pandemic as the government extended loan guarantees to state enterprises. Fiji also remains highly vulnerable to the impacts of climate change and natural disasters-particularly the effects of tropical cyclones. Fiji’s recovery and medium-term outlook also hinge on a recovery of tourism, but the speed with which tourism will recover or whether pre-pandemic tourism patterns will fully reestablish themselves remain unclear.
Policies should aim to continue support in the near term as Fiji reopens and emerges from the pandemic but shift to addressing macroeconomic imbalances as the recovery takes hold. A strong policy response to the pandemic has been imperative, but as economic activity accelerates, a phased fiscal consolidation will be critical to put public finances on a more sustainable footing and place public debt on a downward trajectory. Critical in this regard will be efforts to bolster public revenues in a growth-friendly manner, together with expenditure restraint and continued sound public debt management.
To support the recovery and enhance prospects for diversification, continued emphasis on macro-structural reforms will be needed. The recent passage of the new Investment Act is a welcome step in this regard. However, there remain important opportunities to improve Fiji’s competitiveness and business environment. A key priority must be to tackle the gender gap in labor force participation in order to boost potential growth and make it more inclusive.
The team had fruitful 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 team would like to thank the Fijian authorities for their excellent cooperation.”