The slowdown in economic growth from 4.1 percent in 2004 to an estimated 1.7 percent in 2005 mainly reflects the effects of the loss of preferential trade arrangements in the garment industry. Growth is projected to increase marginally to 2 percent in 2006 and 2.4 percent in 2007 led by growth in agriculture, fisheries and forestry, and the private sector. Inflation in 2004 and 2005 has been kept within the target band of 2-3 percent, but higher inflation of 4 percent is projected for 2006 reflecting the lagged impact of higher oil prices. The external position improved in 2005 as the current account deficit narrowed, aided by strong growth in tourism earnings and remittance inflows. Official remittance receipts reached about 6.5 percent of GDP (about US$174 million in 2004), overtaking earnings from some traditional economic sectors. |
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Fiji's main foreign exchange earner, the tourism industry continued to boom in 2005 (tourist arrivals in the year to August increased by an estimated 11 percent). The robust performance is expected to continue in 2006, supported by increasing accommodation and flight capacities. Total garment exports declined further during 2005 as a result of the expiry of the United States preferential trade agreement in early-2005. However, the extension of the SPARTECA (TCF Provisions) Scheme for another seven years and the provision of other international assistance is expected to somewhat stabilize the industry. Sugar production levels continued to improve during 2005, partly attributable to more reliable cane supply to the mills and relatively lower mill breakdowns. The issue of expiring land leases remains a concern. The sugar industry is projected to grow by 4 percent in 2006. The fiscal deficit widened from 3.3 percent of GDP in 2004 to 4.3 percent in 2005 as additional expenditure was redeployed to several ministries and departments. A slightly lower deficit of 4 percent of GDP is forecast for 2006. Total public sector debt remains at slightly above 50 percent of GDP. The Government of Fiji introduced the Reconciliation, Tolerance and Unity Bill in 2005 which, among other things, would allow those involved in the 2000 coup to apply for amnesty. Although the Government proposed the bill as an attempt to heal the divisions created by the 2000 coup, it has been subjected to widespread criticism, including from the military, the police, and numerous non-government advocacy groups. The proposed bill has been widely debated but has been put on hold until after the May 2006 General Elections. Back to top
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