The Asian Development Bank in its Pacific Economic Monitor states that while the Fiji Parliament has passed the 2024-25 national budget, it must navigate carefully to keep its debt targets on track while maintaining economic growth.

However, it says given limited resources, empowering the private sector to drive economic growth and ease the strain on government finances is equally important.

The ADB says that guided by its medium-term fiscal strategy for the financial year 2024 to 2026, the government budgeted to reduce the fiscal deficit from 7.1% of GDP in 2023 to 4.8% of GDP in the financial year 2024.

It says the government has taken major steps to reverse lost revenues from tax policy changes and the economic downturn during the COVID-19 period.

The ADB says while the government anticipated that over 83 percent of its revenue in the financial year 2024 would come from taxes, actual tax revenue is expected to be 2.3 percent lower than the budget projection.

Contrary to expectations, it says VAT collections slowed toward the end of the fiscal year.

The ADB says the government attributed this to weak compliance and slow consumer spending due to increased emigration.

However, corporate and personal income tax collection was higher than budgeted.

The ADB says following the COVID-19 pandemic, Fiji’s economy experienced a notable resurgence, primarily attributed to the return of tourists, resulting in a 7.8% increase in GDP in 2023.

It says the recovery of the tourism sector has reduced the current account deficit to 9.5% of GDP.

It adds despite these signs of recovery, supply-side challenges in tourism related sectors are poised to impact the short-term economic outlook.

The ADB says public debt declined from 90.6% of GDP at the end of financial year 2022 to 78 percent at the end of financial year 2024.

However, the ADB says it remains high relative to a pre-pandemic level of 48.8% at the end of financial year 2019, constraining the government’s capacity to expand productive investments.

It says the combination of a slowdown in tourist arrivals, underperforming resource-based sectors, reduced domestic consumption due to high emigration rates, and delays in investment projects may exert downward pressure on Fiji’s short- to medium-term growth prospects.

Consequently, it says the projected GDP growth is three percent for 2024 and 2.7% for 2025.