The Macroeconomic Committee has slashed Fiji’s 2026 economic growth forecast by half in its latest revision, dropping it to 1.5 per cent from an earlier 3.0 per cent projection.
Reserve Bank of Fiji (RBF) Governor and committee chairman Ariff Ali revealed that a toxic mix of surging global oil prices, softening tourism, and a sharp domestic pullback in consumer spending is stalling the nation’s post-pandemic momentum.
“Global risks have risen sharply in recent months, driven by escalated conflict in the Middle East,” Mr Ali said, pointing to shipping disruptions through the Strait of Hormuz that had spiked fuel and fertilizer costs worldwide.
He said for net importing countries like Fiji, rising global prices of food and fertilizer had intensified inflationary pressures and heightened food security risks.
He added for Fiji, those global developments continued to be felt through several channels.
“Higher fuel prices increase production and transportation costs, reduce business profits and output, and raise consumer prices, thereby reducing household spending power. Collectively, these factors are expected to weigh on overall economic activity,” Mr Ali said.
“Consumer prices have risen sharply in the past few months. Latest data indicate that inflation rose to 3.9 per cent in May, a significant turnaround from the -3.8 per cent in September 2025.
“Year-end inflation is now expected to exceed 6.0 per cent, underpinned by high imported inflation, particularly through fuel and food prices and its second-round effects.”
The committee noted this pricing pressure was altering local consumer behaviour.
Despite strong inflows of money from overseas relatives, local shoppers are closing their wallets.
Mr Ali said “consumption activity is showing signs of easing as households adopt a more cautious approach to spending as they adjust to higher cost of living and rising economic uncertainty”.
This caution, he said was sending ripples through the private sector, with businesses now projecting retail sales to grow by a mere 2.0 per cent this year, much lower than the 6.8 per cent growth predicted late last year.
And compounding the domestic slowdown, Fiji’s vital tourism engine was also losing steam attributed to tighter monetary policies in key markets like Australia.
“While visitor arrivals remain supportive of economic activity, the pace of expansion has slowed, weakening one of the key drivers of growth.”
Despite the downgrade, the RBF maintains that Fiji’s broader financial foundations remain secure.
Foreign reserves stand strong at $3.4 billion, sufficient to cover 4.7 months of retained imports.
Looking past the immediate 2026 slowdown, the Committee expects a steady recovery, forecasting growth to rebound to 2.5 per cent in 2027 before returning to its long-term historical trend of 3.0 per cent by 2028.
