FIJI’S GDP TO MODERATE
A NEW report released yesterday by the World Bank says Fiji’s medium-term growth outlook is positive but subject to downside risks.
World Bank East Asia and Pacific Economic Update for October 2019 — Weathering Growing Risks — highlights that potential downside risks include another natural disaster and sharp slowdown in China, which could hit Fiji's main export and tourism source markets such as Australia, New Zealand and Japan.
According to the report it's important for the government to start rebuilding fiscal space to respond to future shocks.
The report stated that Fiji’s exposure to frequent natural disasters had caused an average loss of 2 to 5 per cent of the gross domestic product (GDP) per year with Fiji’s fiscal space eroded by disasters and rising expenditures in the past five years.
It recommends that building fiscal buffers through consolidation remains the key policy priority for Fiji.
It continued to state that the recent fiscal policy had been expansionary, however, in FY2019, the deficit declined to an estimated 3.4 per cent of GDP from 4.4 per cent in FY2018 as lower than expected revenue levels were more than compensated by the reduction in expenditure.
Meanwhile the report also highlighted that the government's planned fiscal consolidation was expected to work out and reduce public debt relative to GDP gradually to 46.7 per cent in FY2021 and 45.9 per cent in FY2022.
The World Bank also expects the current account deficits to decline gradually in the projection period.
In terms of the risks and challenges the World Bank states that risks on the domestic front include any setback to fiscal consolidation, and slowing down of the structural reform agenda, which could lead to a further weakening in business confidence.
According to the World Bank the structural reform agenda includes building climate resilience and creating a more supportive environment for privatesector-led growth.
It added that attracting more foreign direct investment (FDI) and expanding the role of the private sector in the economy would require modernising the legal and regulatory framework.