Press Release: No 24/2021
Date: 08 December 2021
The last two years have been extremely challenging for the Fijian economy. While current labour market conditions and broader economic activity are still below pre-pandemic levels, recent indicators suggest that the COVID-19 induced economic recession has started to bottom out. Fiji’s ability to rapidly fully vaccinate over 90 percent of its adult population has enabled the Government to gradually ease COVID-19 restrictions and ultimately reopen borders for international travel from 01 December, helping create a wave of optimism across the country.
The recent assessment by the Macroeconomic Committee is based on the latest available data and extensive consultation with line ministries, tourism stakeholders and the wider business community. Economic growth is expected to rebound by 11.3 percent in 2022, following a re-estimated 15.2 percent contraction in 2020 and a 4.1 percent decline in 2021. The recovery in 2022 will be primarily supported by the recommencement of international tourism and its positive spill-over effects on other sectors of the economy. The main sectors contributing to the expected rebound are accommodation & food services; transport & storage; finance & insurance; wholesale & retail trade; manufacturing and agriculture. The broad-based economic recovery is envisaged to continue into 2023 and 2024, with the economy forecast to expand by 8.5 percent and 7.7 percent, respectively.
This compares with the earlier forecast in July this year, where the Fijian economy was anticipated to rebound by 6.2 percent in 2022 and 8.0 percent in 2023. The higher revised GDP growth forecast for 2022 is based on forward bookings and consultation with the tourism industry and the national airline. It accounts for the earlier reopening of borders as of December this year, with visitor arrivals expected to reach 50 percent of 2019 levels against the earlier assumption of borders reopening in mid-2022 with only 30 percent of 2019 arrivals. Visitor arrivals are forecast to rise further to 85 percent of 2019 levels in 2023 and return to pre-pandemic levels by 2024.
The upward revision in the visitor arrivals forecast is expected to have a positive knock-on-effect on wholesale & retail sales, accommodation and the transport sectors, as well as general investor
sentiments. Other sectoral improvements include the upturn in manufacturing, particularly sugar and mineral water production, the resumption of construction and real estate activities, along with higher electricity consumption and increased uptake in service-oriented businesses in the financial, professional and information technology sectors. Concomitantly, tax collections is expected to grow in line with the recovery in the domestic economy.
Despite the growing optimism, there are downside risks to the outlook. The vaccine inequity across the globe, with pockets of vaccine hesitancy, could lead to new variants that are more potent and highly transmissible, resulting in renewed lockdowns and other mobility restrictions globally, thereby dampening tourism demand. Therefore, a slower-than-anticipated travel appetite, the wait-and-see approach by investors in light of the upcoming 2022 General Elections, and the ongoing threats from natural disasters and climate change can easily stifle economic recovery going forward. On the upside, “lockdown fatigue” across the globe could flare up travel appetite, resulting in a stronger economic recovery.
Studies have highlighted that the COVID-19 virus will likely become endemic, with new variants such as Omicron emerging as we move forward. Therefore, it is paramount to adapt to the new normal by vaccinating the population, stringently following public health measures, including booster shots, and mobilising adequate resources in the health sector to ensure the continuation of economic activity with minimal disruptions.
The next review of the macroeconomic projections is scheduled for May 2022.