Recovery support
FIJI’S economic recovery and medium term outlook hinges on recovery of tourism.
This was according to Todd Schneider the Mission Chief for Fiji, and the Division Chief of the International Monetary Fund’s (IMF) Pacific Islands Division in the Asia and Pacific Department.
However, he said the speed and the depth at which tourism would recover or whether prepandemic patterns of tourism would re-establish themselves fully remained unclear.
“Fiji also remains highly vulnerable to climate change and natural disasters, particularly the effects of tropical cyclones,” he said.
“IMF recommended the policies should really aim to continue support in the near term as Fiji reopens and emerges from the pandemic let’s shift to addressing macroeconomic imbalances as the recovery takes hold.
“A strong policy response to the pandemic has been imperative and it has been present but as economic activity now starts to accelerate a phase fiscal consolidation will be critical really to put public finances on a more sustainable footing and importantly, to place public debt on a downward trajectory.”
Mr Schneider added critical in this regard, from their viewpoint, would be to bolster public revenues in a growth friendly manner with expenditure restraint and continue sound public debt management.
“To support the recovery and enhanced prospects for diversification continued emphasis micro structural reforms will be necessary,” he said.
The IMF reported the impact of the COVID 19 pandemic on Fiji had been quite severe as real GDP contracted by 15.7 per cent in 2020.
Mr Schneider said they projected this would contract by a further 4 per cent in 2021 in the wake of the Delta variant outbreak, along with local lockdowns and protracted closure of the border.
“The fiscal deficit reached about 13.7 per cent of GDP in FY 20-21 by our measure, and is predicted to remain at about that level for FY 21-22 with an accompanying rise in public debts to about 90 per cent of GDP by the end of the current fiscal year.
“Year on year consumer price inflation reached -2.8 per cent at end 2020 and the external balance of payments has been cushioned by strong inward remittances and an influx of foreign financing flows from multilateral and bilateral creditors.”
He added the risks to the outlook were skewed still — a bit to the downside.
“Vulnerabilities have been exacerbated by diminished fiscal space as the fiscal response to COVID 19 pandemic has resulted in large government budget deficits and accompanying rise in public debt.
“Contingent liabilities to the government have also surged during the pandemic, as the government extended loan guarantees to state enterprises.”
With the recent passage of the new Investment Act 2021 it was a welcomed step according to Mr Schneider in this regard but there also remained important opportunities to improve Fiji’s competitiveness and business environment.
“A key priority must be to continue to tackle the gender gap and labour force participation in order to boost potential growth and make it more inclusive.”