STATEMENT BY THE CHAIRMAN OF THE MACROECONOMIC COMMITTEE [1] AND GOVERNOR OF THE RESERVE BANK OF FIJI
GDP GROWTH FOR 2022 REVISED UPWARD
Recent economic data shows that the growth momentum has accelerated, especially in the third quarter. The better-than-expected rebound in the Fijian economy has been largely underpinned by higher visitor arrivals which reached 426,934 by September or around 63.3 percent of the tourist arrivals in the same period in 2019. Based on the trend in arrivals in the past nine months and forward airline and hotel bookings for the remainder of 2022, this year’s arrivals are expected to rise to just above 581,000 visitors by year-end compared to the earlier projection of around 492,000.
In line with the visitor arrivals and tourism earnings, consumption spending was also boosted by the recovery in employment and continuous growth in inward remittances throughout the year. Investment spending also picked up, albeit at a slower pace, due to the increased cost of construction and policy uncertainty around the upcoming general elections. The overall rebound in the economy has led to a pickup in tax collections and an improved fiscal position from which the Government’s expansionary stance will continue to support the economy.
In light of the latest economic data and the feedback from various industry stakeholders, the Macroeconomic Committee has upgraded the GDP growth outlook for 2022 to 15.6 percent from the 12.4 percent expected earlier in June. The key sectors contributing to the growth this year will be accommodation & food services, transport & storage, administration & support services, wholesale & retail trade, agriculture, and net indirect taxes.
For 2023, growth is now envisaged to slow to 6.0 percent from the 9.2 percent expected earlier primarily driven by base-related effects. Apart from the continuing recovery in tourism, the rebound in construction activity post-general elections along with the upswing in other services, industrial sectors, and net indirect taxes is expected to positively contribute to growth next year. In 2024-25, economic growth is forecast to return to the pre-pandemic trend and average around 3.1 percent.
Despite the remarkable growth this year, the economy will not return to pre-Covid level until 2024 as there has been permanent economic scarring, given the cumulative contraction of 22.1 percent over the last two years. There are also significant downside risks to the outlook, especially on the global front, such as ongoing geo-political tensions and their impact on food and energy prices, inflation-induced monetary policy tightening in advanced economies, the associated appreciation of the US dollar, coupled with the heightened risk of a global recession. Domestically, climate change and natural disasters continue to remain inherent risks to the growth outlook.
While the rebound in tourism will be the main catalyst for growth in the near-term, sustainable economic growth post-2024 requires continuous investment in improving the ease of doing business and raising productivity to encourage a private sector and export-led growth. The next review of macroeconomic projections is scheduled for the second quarter of 2023.
ARIFF ALI
Chairman of the Macroeconomic Committee
[1] The Macroeconomic Committee is made up of Heads and senior representatives from the Ministry of Economy; Fiji Bureau of Statistics; Ministry of Commerce, Trade, Tourism & Transport; Office of the Prime Minister; Investment Fiji; Fiji Revenue & Customs Service and the Reserve Bank of Fiji.