The Reserve Bank of Fiji (RBF) has decided to maintain its Overnight Policy Rate (OPR) at 0.25 percent, continuing its accommodative monetary policy to ensure stable inflation and maintain foreign reserves at comfortable levels. According to RBF Governor Ariff Ali, annual headline inflation declined significantly to -3.5 percent in August, marking a decrease from -1.5 percent in July and 3.8 percent a year ago. This reduction in inflation is largely credited to the VAT reduction, bus fare subsidy, and lower prices for food, transport, and fuel.
Ali also noted the ongoing risks from geopolitical tensions that can affect global commodity prices, alongside the potential impact of the approaching cyclone season. Despite these global uncertainties, foreign reserves are robust at approximately $3.8 billion, offering coverage for six months’ worth of imports.
Fiji’s economy continues to demonstrate resilience, achieving a growth rate of 3.5 percent in 2024, after substantial growth of 9.4 percent in 2023 driven by the services, agriculture, and manufacturing sectors. While the forecast for this year is a slightly lower growth rate of 3.2 percent, sector performance remains varied.
The tourism sector, a critical part of Fiji’s economy, saw visitor arrivals increase to 642,810 by August, an uptick supported by visitors from the US, the Pacific region, the UK, and Europe, along with a recovery from key markets like Australia and New Zealand. Strong consumer activity continues, backed by increased disposable incomes, remittance flows, and heightened lending. Investment activity has shown encouraging signs of picking up, particularly with the increase in building permits and imports of construction materials amid easing prices.
Liquidity within Fiji’s banking system stands at $2.2 billion, and low interest rates continue to support economic growth. Despite the favorable domestic conditions, the RBF remains vigilant against the backdrop of global uncertainties and has reaffirmed its commitment to adjust policies as necessary to safeguard the country’s economic stability.
The overall outlook appears cautiously optimistic. Fiji demonstrates substantial economic resilience, supported by strong consumer confidence, a stable monetary stance, and ample foreign reserves, all of which should help cushion the nation against external disturbances. With a positive trend in fiscal measures and continued monitoring of global events, Fiji is poised for stable economic progress in the coming months.