The International Monetary Fund (IMF) says Fiji’s economy is expected to grow by about 2 percent in 2011.
An IMF team which recently visited Fiji says this is ‘by far’ the best result of the past five years, and comes after two years of contraction.
However it remains cautious about Fiji’s medium-term prospects, ‘unless structural reforms are accelerated, and the business climate and political situation improved.’
The IMF team says high food and oil prices, and increases in Value Added Tax (VAT) and the electricity tariff have increased inflation, but that this rate should come down to 5 percent in 2012.
‘The financial sector is sound, but the Fiji National Provident Fund needs to carry out a pension reform—with appropriate transitional provisions for those in or nearing retirement—in order for it to be made sustainable over the long term.’
The IMF mission encourages the Reserve Bank of Fiji to remain vigilant to any signs of inflationary pressure.
‘The fiscal position could be strengthened. Debt is 55 percent of GDP—relatively high for a small, open economy vulnerable to shocks—and the government also faces contingent liabilities of more than 15 percent of GDP, as well as unfunded FNPF liabilities. The fiscal deficit is likely to remain broadly stable this year at around 2½ percent of GDP, which is commendable, and further reductions over time would be prudent,’ the IMF mission team says in a statement.
The mission sees structural reforms and resolution of political uncertainties as key to spurring investment and raising Fiji’s growth rate.
The mission will be preparing a report that the IMF’s Executive Board will discuss in January 2012.
More: IMF statement