Significant risks to Fiji’s economic outlook remain – IMF

IMF Mission Chief to Fiji, Marshall Mills addressing the media at a press conference at RBF, Suva, on Wednesday, March 22, 2023. Picture: ELIKI NUKUTABU

While Fiji’s strong economy is set to grow by 7.7 per cent of GDP this year, significant risks to the outlook remain, especially the high debt levels.

According to the International Monetary Fund (IMF) team led by Marshall Mills, the team estimates Fiji’s debt levels to be around 85 per cent of the GDP, which did not leave the country with fiscal space to counter shocks actively, leaving the country vulnerable to external shocks.

IMF division chief and mission chief for Fiji, Asia and Pacific Department, Mr Mills said Fiji’s growth outlook beyond the current rebound would rest critically on the ability to implement a well-designed long-term reform and growth strategy.

“However, the risks to the outlook are tilted to the downside. Above all, Fiji’s high debt deprives it of the fiscal space to respond to shocks. The country remains vulnerable to weaker growth in advanced economies that would reduce tourist inflows and remittances,” he said.

According to the IMF team renewed acceleration in global commodity prices and growing skilled labour shortages could revive supply-side inflationary pressures.

Mr Mills said on the upside, reduced policy uncertainty could help jumpstart private investment, and continuing momentum in tourist inflows could sustain above-trend economic growth in the near-term.

“Strong medium-term growth is vital to boosting living standards, reducing the public debt burden, and rebuilding resilience.”

At a press conference held at the Reserve Bank of Fiji yesterday, Mr Mills said some of the key elements that would contribute towards the economic rebound included promoting productivity growth, cutting the cost of doing business, enhancing social inclusion, and meeting the economy’s investment needs against the backdrop of fiscal consolidation.

“The key priority in our view, currently, is to reinforce the balance sheet of the government in order to create the space to manage future shocks. This will imply some medium term fiscal consolidation to bring down the debt to GDP ratio.”

Mr Mills said that should be part of a comprehensive approach that included efforts to promote growth, private investment and social inclusion.

In addition, he said a further reduction in the red tape and improving infrastructure would help attract private and foreign investment.

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