goals, leading to a sharp increase in public debt. The compound effect of lost liveli- FIJI Key conditions and hoods across sectors and asset damage from the natural disasters exposed a sig- challenges nificant proportion of the population to in- creased poverty and vulnerability. Exclud- Table 1 2021 Fiji is a small island nation in the South ing the impact of the COVID assistance Population, million 0.9 Pacific Ocean with a population of about measures, poverty rate based on the up- GDP, current US$ billion 4.7 900,000. Remoteness, natural hazards, and per-middle income poverty line is estimat- GDP per capita, current US$ 5163.1 climate change represent major obstacles ed to have increased by 11 percentage a 2.6 International poverty rate ($1.9) to development. Tourism is the main dri- points in 2020 from the pre-pandemic lev- a 17.8 ver of the economy and a major source of el. The Government introduced several Lower middle-income poverty rate ($3.2) a 55.5 foreign exchange, contributing nearly 40 measures to mitigate these impacts, in- Upper middle-income poverty rate ($5.5) School enrollment, primary (% gross) b 116.5 percent of GDP, prior to COVID-19. In re- cluding top-ups through existing social Life expectancy at birth, years b 67.4 cent years to 2019, growth was under- programs and the National Provident pinned by robust tourism, rising house- Fund unemployment assistance. Source: WDI, Macro Poverty Outlook, and official data. a/ Most recent value (2019), 2011 PPPs. hold consumption, and extensive recon- b/ Most recent WDI value (2019). struction after major natural disasters. Be- fore the onset of the global pandemic, Fiji’s poverty rate was 17.8 percent and 55.5 per- Recent developments Reopening of Fiji’s borders to tourism in cent based on the lower and upper middle- December 2021 marked a major step to- income poverty lines, respectively. Reopening of Fiji’s borders to tourism in The COVID-19 pandemic presented Fiji December 2021 after a 21-month closure wards economic recovery. The economy is with an economic crisis of unprecedented marked a major step towards economic re- expected to reach the pre-pandemic level scale. The country recorded one of the covery. Border reopening was enabled by a by 2024, supported by private consump- steepest economic contractions in the COVID-19 vaccination rate of over 90 per- tion and investment. The outlook remains world and the worst in its history. Follow- cent and the adoption of best-practice ing the onset of the pandemic and border COVID-19 control policies and protocols. highly uncertain as the tourism sector closures in 2020, the tourism sector col- Tourists and visitors have begun returning may recover slower than expected. Risks lapsed with a ripple effect on all segments from the country’s traditional source mar- also include re-emergence of COVID-19, of the economy. Real GDP contracted by kets, especially Australia. The initial fig- cyclones and floods, and the impact of the 15.2 percent in 2020 and a further 4.1 per- ures show the arrivals to be around 45 per- cent in 2021 in the wake of the Delta vari- cent of pre-COVID-19 levels. However, Russia-Ukraine war. Speeding up eco- ant outbreak. The country was also hit by while this is a positive sign, recovery is nomic recovery will require structural re- Tropical Cyclone (TC) Harold and TC Yasa likely to be slow and risks remain due to forms while fiscal consolidation is needed in 2020, and TC Ana in 2021 with extensive the emergence of potential new variants, to ensure that the public debt returns to a damage to agriculture, public buildings, a highly vulnerable population given the downward trajectory. and tourism facilities. These shocks aggra- high prevalence of non-communicable dis- vated pre-existing fiscal vulnerabilities eases, and the risk of cyclones and floods. and upended the authorities’ fiscal policy The high dependence on tourism adds to FIGURE 1 Fiji / Real GDP growth and contributions to real FIGURE 2 Fiji / Actual and projected poverty rates and real GDP growth GDP per capita Percent, percentage points Poverty rate (%) Real GDP per capita (constant LCU) 10 80 14000 5 70 12000 60 0 10000 50 -5 8000 40 6000 -10 30 4000 -15 20 10 2000 -20 2017 2018 2019 2020 2021 2022 2023 2024 0 0 Private Consumption Government Consumption 2019 2021 2023 Capital Formation Net Exports International poverty rate Lower middle-income pov. rate GDP Growth Upper middle-income pov. rate Real GDP pc Sources: Ministry of Economy, and IMF and World Bank staff estimates. Source: World Bank. Notes: see Table 2. MPO 1 Apr 22 the vulnerability of sustained recovery 2020, reflecting the drop in the service poorest and most vulnerable as food ac- and highlights the need for diversified balance. Tourism receipts in 2021 fell by counts for about 40 percent of their con- sources of growth. The structural reform 94 percent from the pre-pandemic level. sumption basket. The Government is com- agenda includes building climate re- Pressure on the balance of payments has mitted to fiscal consolidation with the fis- silience and creating a more supportive en- been cushioned by the influx of external cal deficit projected to fall to 4.0 percent vironment for private-sector-led growth. financing through loans and grants from of GDP in 2024 from 12.1 percent in 2022. Attracting more FDI and expanding the multilateral and bilateral creditors. This is This will be achieved through efforts to role of the private sector in the economy supplemented by strong growth in per- mobilize domestic revenues, including will require modernizing the legal and sonal remittances, which rose by 42 per- through the revenue measures announced regulatory framework. cent in 2021 from 2019, the sale of Energy in the Revised Budget in March. In par- A steep fall in revenue and rise in expen- Fiji Limited (EFL) shares abroad and the allel, spending will be contained through ditures due to fiscal stimulus to mitigate additional 2021 IMF SDR allocation. Re- strict wage bill control and a reduction in the impact of the pandemic widened the serves remained stable, US$1,570 million operating subsidies and capital outlays. fiscal deficit to 8.1 percent of GDP in 2020 (9.9 months of prospective imports) at The risk of debt distress has heightened and 12.8 percent in 2021. As a result, the end-December 2021. with the debt-to-GDP ratio projected to public debt-to-GDP ratio increased to 87 climb to 90.9 percent of GDP in 2022, re- percent in 2021 from 51.6 percent in 2019. flecting borrowing to counter the impact Monetary policy was eased to counter the of COVID-19 and the contraction in nom- impact of COVID-19 and remains accom- Outlook inal GDP. Public debt is assessed as sus- modative. The Central Bank cut the tainable over the medium-term, contingent overnight policy rate from 0.50 to 0.25 per- Outlook is subject to considerable uncer- on fiscal consolidation, the resumption of cent in the first quarter of 2020. Inflation tainty and hinges on the tourism sector’s growth and commitment to borrow pri- fell to a historic low of -2.8 percent at end- performance. Growth is projected to recov- marily on concessional terms. The current December 2020, in the context of a sub- er to 6.3 percent in 2022 and rise to 7.7 per- account deficit is expected to narrow to 8.8 stantial output gap, and on account of low- cent by 2023 driven by increased private percent of GDP in 2022 and converge to 6.8 er food and fuel prices as well as reduced consumption and investment supported percent of GDP by 2024 due to increases in tariffs and taxes (implemented to mitigate by tourism and remittances. Poverty is ex- the services and secondary income balance the impact of the pandemic). Inflation re- pected to follow a downward trend, al- on account of higher anticipated tourism merged in the second half of 2021 due to though it is not anticipated to return to and remittance inflows. Risks to growth in- the surge in global commodity prices and pre-pandemic levels by 2024. The Russia- clude a drop in tourism appetite, a new continued supply chain disruptions, reach- Ukraine war is likely to add to inflationary wave of COVID-19 in Fiji or Australia and ing 3 percent at year-end. The current ac- pressures and dampen external account New Zealand, impacts of adverse natural count deficit widened to 15.6 percent of and may also impact tourism. Higher food disasters, and the economic consequences GDP in 2021, relative to 13.2 percent in and energy prices will especially harm the of the Russia-Ukraine war. TABLE 2 Fiji / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2019 2020 2021e 2022f 2023f 2024f Real GDP growth, at constant market prices -0.4 -15.2 -4.1 6.3 7.7 5.6 Inflation (Consumer Price Index) -0.9 -2.8 3.0 4.5 3.0 2.7 Current Account Balance (% of GDP) -12.6 -13.2 -15.6 -8.8 -7.0 -6.8 Fiscal Balance (% of GDP) -4.3 -8.1 -12.8 -12.1 -6.4 -4.0 a,b International poverty rate ($1.9 in 2011 PPP) 2.6 4.9 5.9 4.9 3.7 3.0 a,b Lower middle-income poverty rate ($3.2 in 2011 PPP) 17.8 25.4 28.0 25.2 21.5 20.0 a,b Upper middle-income poverty rate ($5.5 in 2011 PPP) 55.5 66.2 69.0 65.9 61.9 59.1 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. a/ Calculations based on EAPPOV harmonization, using 2019-HIES.Actual data: 2019. Nowcast: 2020-2021. Forecasts are from 2022 to 2024. b/ Projection using neutral distribution (2019) with pass-through = 0.87 based on GDP per capita in constant LCU. MPO 2 Apr 22