Fiji, Republic of the Fiji Islands

Lacklustre tourism and weaker growth

Fiji’s economic growth, which continues to be driven by tourism and trade, is progressing at a moderate pace. It is set to slow in 2026, but is expected to pick up slightly in 2027. Tourism is Fiji’s main growth driver and account for a third of GDP. The number of visitor arrivals reached a new record in 2025: 986,367 visitors, compared with 894,389 in 2019, i.e., before the Covid-19 pandemic. Tourism revenue rose by 10.9% compared with 2024. However, these tourism revenues and those from related services are likely to slow down due to limits on hotel capacity, labour shortages and rising air transport costs. The rise in oil prices affects not only the tourism sector, but also agriculture, industry, transport, electricity and food. Last, household consumption will suffer despite an increase in subsidies.

In order to reduce the country’s energy dependence (80%) and address the pressures on infrastructure, several major projects have been launched. Energy Fiji Limited and the Fiji National Provident Fund are working to develop renewable energy and aim to increase the share of renewable electricity to 90% by 2035 (a project estimated at FJD 2 billion). Their programme, which includes two hydroelectric projects – Qualiwana and Vatutokotoko – is projected to increase national hydroelectric generation from 94 to 167 GWh per year. Furthermore, the 2026–2027 budget allocates a substantial sum for the construction and maintenance of roads and bridges. The government has commenced construction of four major bridges (Lami/Suvavou, Medraukutu, Sabeto and Viseisei), at a cost of FJD 200 million, co-financed by the World Bank and the African Development Bank (AfDB), under the Fiji Critical Bridges Resilience Project. At the same time, the modernisation of water infrastructure is under way, following approval by the AfDB in 2025 of FJD 145 million in project funding to upgrade the Kinoya sewerage system. These investments are supporting the outlook for the construction sector, which is expected to recover with anticipated growth of 5.4 % in 2027.

Inflation is expected to accelerate as a result of rising global oil prices stemming from the conflict with Iran, as well as the knock-on effect on domestic prices for fuel, electricity, transport and food. Despite supportive fiscal policy, subsidies will not be sufficient to sustain growth in domestic consumption, which is forecast to stand at 3% in 2027. The central bank strikes a balance between supporting economic activity, controlling inflation and maintaining adequate foreign exchange reserves to keep the local dollar pegged to the currency basket. To this end, it manages the money supply.

Expansionary budget

The government introduced support measures in response to the Covid crisis of 2020–2022, which hit the Fijian economy hard through the tourism sector. The relief measures consequently widened the public deficit. However, the deficit narrowed rapidly on back of the economic recovery and a marked increase in tax revenue (rises in VAT and the airport departure tax). Four years later, Fiji is facing a new shock: rising oil prices. The deficit is widening due to the reduction in VAT in August 2025 and immediate support measures. Public debt continues to rise, but its structure remains favourable. Nearly two-thirds of the debt is held by domestic creditors, mainly the Fiji National Provident Fund (FNPF), whilst external debt is held primarily by multilateral official creditors on concessional terms. Two-thirds of the debt is denominated in local currency and its average maturity exceeds 11 years. Debt servicing, whilst significant but sustainable, accounts for 7.1% of GDP in 2026, or 22.7% of public expenditure.

In response to the global shock to oil prices and while maintaining its target of reducing the budget deficit to 3% of GDP by 2030, the government is implementing a fiscal policy based on three pillars: operational austerity, temporary support measures for households and businesses, and targeted investment in infrastructure. First, Fiji plans to cut operational expenditure by 10%, with a ceiling set at USD 774 million, requiring a 20% reduction in the salaries of ministers and members of parliament. Furthermore, in response to the fuel crisis, the government has introduced support measures in the transport, electricity, social welfare and sugar sectors. It will doubtless need to continue these measures until the next elections. Last, to support the private sector, investment in infrastructure is increasing significantly to address roads, bridges, water and sanitation, flood control, as well as key infrastructure projects including a wastewater treatment plant. Capital expenditure is expected to rise from USD 408 million in 2025 to USD 462 million in 2027, representing a cumulative increase of 13.2%.

Fiji’s heavy reliance on imported goods – particularly fuel, equipment, building materials and staple foodstuffs, including rice – as well as the limitations on its economic diversification, fuels its chronic trade deficit. The global shock to oil prices is harming the trade balance, the deficit of which will remain high at 27.7% of GDP in 2026. Conversely, the substantial surplus in the services balance (18.4% of GDP), driven by tourism, and remittances from migrants (8.5%), are limiting the current account deficit. Fiji will continue to finance this deficit mainly through FDI (in tourism and related property), which is projected to account for more than 5% of GDP in 2026. This will be supplemented by project aid and budget support from Australia and New Zealand, as well as other concessional financing (World Bank and Asian Development Bank). Nevertheless, part of the deficit would continue to be covered by a drawdown on foreign exchange reserves which were the equivalent of around four months’ worth of imports in 2025.

Regional stability and internal tensions

Although Fiji has been a parliamentary democracy since it gained independence in 1970, its political history has been marked by considerable instability. Four military coups occurred between 1987 and 2006, against a backdrop of ethno-religious tension between the Fijian and Indian communities. In 2013, democracy was reaffirmed when a new constitution was introduced. Although it granted the military the power to intervene in domestic affairs and concentrated powers in the hands of the executive, it nevertheless represented a step towards the creation of a genuine rule of law. Following the general election in December 2022, Sitiveni Rabuka was appointed Prime Minister, bringing to an end the 16-year rule of Frank Bainimarama (who was also head of the armed forces until 2014) and his party, the Fiji First Party (FFP). Mr. Rabuka leads a diverse coalition with a large majority in Parliament (38 to 17), thanks to the inclusion of some of the MPs who had previously belonged to the FFP until its dissolution in 2024. The next general election is expected to take place between December 2026 and February 2027. The local elections in September 2026 (the first since 2005) will provide an initial indication of public opinion, whilst the cost of living and inter-ethnic relations will be the main issues in the electoral debate.

Since the election of Sitiveni Rabuka, Fiji has drawn closer to its long-standing Western partners, namely the US, Australia and New Zealand. Closer ties with Washington have resulted in enhanced cooperation on maritime security and military interoperability. At the same time, the bilateral Vuvale agreement, signed on 6 July 2026 between Canberra and Suva, aims to strengthen security in the South Pacific to address Chinese expansion in the region. In addition to security issues, labour flows in the Pacific are a cornerstone of regional relations. The Pacific Australia Labour Mobility (PALM) programme and the Recognised Seasonal Employer Scheme (RSE) promote labour mobility and the transfer of funds to Fiji.

Closer ties with the West do not mean that Fiji will sever relations with China. To mark the 50th anniversary of their diplomatic ties, China and Fiji reaffirmed their strategic partnership and their cooperation in infrastructure areas (road modernisation on Vanua Levu) and trade (China is Fiji’s third-largest trading partner).

Last updated: July 2026