Fiji: after the tourism recovery

Tourism, which supported Fiji’s economy post COVID, has largely stabilised as a result of capacity constraints and uncertainties in home markets.

"Fiji’s remarkable turnaround in economic performance from its deepest pandemic-induced recession is due to the nation’s ability to quickly welcome tourists in large numbers once it opened its international border.”

Should Fiji be concerned?

The short answer is: don’t worry.

Private sector investment is emerging. The economy is doing okay on average, but some businesses are finding conditions challenging. But as private investment broadens, many of these businesses will recover.

Consumer demand, which makes up the bulk of Gross Domestic Product (GDP), is expected to lose some momentum, though, as the growth of recent drivers (in particular, remittances) slows.

There is no risk of recession, but the rate of growth is expected to slow. ANZ Research are forecasting Fiji’s GDP to grow by 2.8 per cent in 2025 and 2.6 per cent in 2026.

ANZ Research is confident of stronger growth from 2027, when international tourism will return to being a key driver of growth as new capacity comes online.

Further economic stimulus is anticipated with some of the new industries considered by Fiji also expected to be emerging by then.

But how do all the pieces of the economy fit to create a growth scenario where ANZ Research believes there will be a pick-up within two years, despite possible constraints?

Slowing consumer demand

Momentum in retail trade across Fiji has slowed as prices have increased.

Since September 2023, retail sales have fallen 2.2 per cent, in the year to September 2024 – which are the most recent available figures.

ANZ Research believe consumer demand did better in the last quarter of 2024, with wage increases a key driver.

Income support payments announced in the budget, such as a staged rise in minimum wages and an increase in civil service wages would have added to the rise.

Other government transfer payments, including a rise in pension and social safety net payments, will have also helped.

Most of these income increases will have flowed through to private consumption, boosting spending in the last quarter of 2024.

Money from overseas

Private money transfers into Fiji from family members working abroad – known as remittances – are an important source of income for many Fijian households.

They improve household disposable income, support consumer demand and add to foreign exchange reserves.

Remittances now constitute about 10 per cent of Fiji’s GDP, more than double the 4.6 per cent of 2019.

About 15 per cent of household budgets, on average, are supported by remittances.

Traditionally, this ‘family bank’ has helped stabilise demand during periods of economic shock, particularly covering loss of employment, as was the case in 2016 (Cyclone Winston) and at the height of the pandemic (2020 and 2021).

Remittances have risen, with total private flows up by 15.4 per cent to $871 million Fijian dollars (FJD) in the year to June 2022, before surging to FJD $1,095 million in 2023 (up 25.8 per cent) and to FJD $1,231 billion in 2024 (up 12.3 per cent).

Most of this rise is from the rapidly expanding Pacific Australia Labour Mobility (PALM) scheme. ANZ Research expect remittances will grow further in 2024-25 and will stabilise after that.

The flow of overseas migration is reversing, as the need for extra workers in Australia and New Zealand has run its course.

On a cumulative basis, Fiji’s population loss due to overseas migration will fall from 2025-26, limiting the upside to remittances growth.

However, that will be more of a sideways story than a downtrend. PALM scheme numbers in Australia could stabilise at current levels as workers can stay for up to four years.

If the number of new PALM arrivals picks up significantly, remittances may move higher.

Visitor arrivals peak

Fiji’s remarkable turnaround in economic performance from its deepest pandemic-induced recession is due to the nation’s ability to quickly welcome tourists in large numbers once it opened its international border.

Visitor arrivals in 2023 exceeded the record arrivals of 2019 and in 2024, inbound nearly reached one million visitors, almost unthinkable at the height of the pandemic.

The return of international tourism returned people to their jobs and created new employment.

This returned household financial consumption to its pre-pandemic levels and helped restore equilibrium in the economy.

However, ANZ Research believes the numbers have likely peaked for Fiji in terms of tourism’s contribution to GDP growth. Visitor numbers have stabilised, albeit at a higher level on a moving annual total basis (“Visitor arrivals” figure below).

Visitor arrivals by purpose and main markets, moving annual totals

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It is expected Fiji may find it difficult to attract more visitors out of its key markets of Australia and New Zealand.

Its market share of Australian tourists has returned to its pre-pandemic level of about 4 per cent.

Australians are also now saving more of their income, perhaps due to uncertainty around global growth as the world reacts to US trade policies.

Interest rates also remain on the tight side of neutral, which is making households more cautious about discretionary spending.

ANZ Research think Fiji will do well if it is able to reach last year’s level of inbound demand.

That will keep activity in the tourism economy at a higher plateau but limit its chances of adding to GDP growth.

Investment pick-up

Fiji’s September 2024 quarter building approvals data showed that the current price (nominal) value of building approvals fell 5.8 per cent quarter on quarter to FJD $133 million.

However, for the 12 months to September, approvals were up 68.6 per cent year on year to FJD $381 million. The Shopping Mall and Warehouse segments were the main drivers.

Fiji is building a solid investment pipeline for non-dwelling buildings, having already broken the previous landmark of FJD $350m (on an annual basis) reached in 2018 (“Building approvals” Figure below).

Building approvals, moving annual totals: private

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Several projects including offices, shops, warehouses, hospitals, factories, hotels and resorts are slated to commence over the next two to three years.

With ongoing policy and legislative certainty, more of these projects are entering the permitting stage. ANZ Research expect building approvals to remain strong, in both value and volume (IE inflation adjusted) for the rest of this year and heading into 2026.

As approved projects go to commencement, construction activity is expected to pick up and take a greater role in driving economic growth from the second half of this year and in 2026. New investment will generate jobs, support household income and private demand.

Public demand

Budget 2024-25 signalled a continuation of policy accommodation. Government operating expenditure is forecast to increase by 8.4 per cent to FJD $3,232m in 2024–25.

The largest component (30.9 per cent) of that is wages and salaries, at just over FJD $1,000 million in 2023-24. That component is forecast to grow 15.1 per cent in 2024-25, driven by a 7–20 per cent catch-up in wage rises to civil servants.

The second largest component (21 per cent) is operating grants to statutory bodies and entities that sit outside the government. These grants are forecast to rise by 8 per cent to FJD $932m over the current financial year, which, if realised, would be a record.

The government’s capital works budget is also up. It is rolling out some large projects including the new Capital Tourism Program focussing on road widening projects, the Fiji Tourism Development Program in Vanua Levu, construction of hydro powerplants, bridge construction and projects under the Fiji Water Sector Strategy 2050 document.

Constrained before pick-up

Overall, growth is likely to be more constrained over the next two years.

With consumer demand and international tourism demand expected to stabilise, import demand is also likely to see lower growth. Hence taxes on products, which account for 20 per cent of GDP, will be constrained. Private investment will provide a partial offset though.

But there is a pick-up expected in 2027. While ANZ Research expect a slower pace of GDP growth over the next two years, they remain confident that stronger growth will return from 2027 when international tourism once again becomes the key driver of growth due to expansion of capacity.

New industries are also expected to emerge by 2027, further stimulating the economy.

Kishti Sen is Pacific Economist at ANZ, Tom Kenny is Senior International Economist at ANZ.

This is a version of work originally published on ANZ Research on March 10, 2025. Subscribers can access the research here.