Reports Show Fiji’s Economy Makes Progress With Right Steps

iji’s sovereign risks remain low despite a downgrade by American Credit Ratings agency S&P which recently downgraded Fiji’s credit rating to B+ from BB-.

Notwithstanding this and the higher level of public sector debt due to COVID-19 induced stimulus spending, Fiji’s debt servicing ability remains intact. Development partner support is strong.

This year’s budget deficit funding looks solid, with the Government not requesting any relief from private creditors. Most importantly, the 2021-2022 Budget Papers show the Government will pursue a fiscal policy of bringing the deficit and debt down over the medium term.

As these metrics trend down, Fiji’s debt affordability will improve.This has been the findings of reputed economistsInternational Economist Kishti Sen and Senior International Economist Tom Kenny.

The two penned ANZ’s report on Fiji which came out on 1 October 2021. They have noted and applauded steps taken by the Fijian Government in light of the pandemic, which has affected every single country.

The two have further noted: “Following the onset of the pandemic, Fiji’s Government had little choice but to use the fiscal policy lever, run a larger deficit, support demand and prevent a deeper downturn in the economy.

“However, running back-to-back fiscal stimulus packages will see debt rise to FJD9.1bn (92% of GDP) in 202122 from FJD5.7bn (48% of GDP) in 2018-19. Nonetheless, a switch to cheaper overseas debt last fiscal year has lowered the cost of debt, which has limited the increase in the debt servicing burden to what might otherwise have been,” they said.

Record levels of foreign reserves are providing stability to the exchange rate and offshore interest payments.

“In addition, Fiji has a decent economy, which will return to robust growth once the worst of the pandemic is over. With an improving economy, the debt-to-GDP ratio should come down over time to more sustainable levels, providing Fiji with continued market access to run its development goals,” they said.

Westpac too has had positive outlook regarding Fiji. In their Westpac Wave, a quarterly economic update, they note that the Fijian economy came past the worst: Recovery in sight although caution remains.

Westpac upgraded its real GDP forecast for 2021 and project the Fijian economy to contract by a lower 3.8 per cent from a contraction of 4.2 per cent anticipated in the last update.

This outcome rests on the back of activity generation through fiscal and monetary stimulus, positivity surrounding widespread vaccination and uplifting of domestic borders.

For 2022, Westpac anticipates well above trend growth, supported by an acceleration of vaccinations to those below 18 years and achieving herd immunity, major uptake in domestic demand and the reopening of the international borders with quarantine-free travel.

The magnitude of the recovery next year though will differ under different scenarios.

The economic outlook for 2023 looks promising and we project the Fijian economy to grow further with the return of international tourism, increase in business and consumer confidence, and ongoing fiscal and monetary stimulus.

These two independent reports on how Fiji’s economy is progressing shows us right steps have been taken which have been applauded by real economists, not the online keyboard types.