FIJI’S Reserve Bank predicts that the country’s economy will continue on a downward trend as the effects of the conflict between the US and Iran continue to be felt globally.
Elevated global fuel prices, tighter monetary conditions in major trading partner economies, and a recent domestic electricity tariff hike threaten to dampen growth.
In its May 2026 Economic Review, the Reserve Bank of Fiji has pointed out that the country is not immune to the effects of the global economy trends.
The RBF Board kept the Overnight Policy Rate unchanged at a quarter of a per cent in May, judging that its twin objectives of low inflation and adequate foreign reserves remain intact. However, the central bank warned that external and domestic pressures are mounting.
Headline inflation turned positive in April, rising to almost two per cent after more than a year of deflation, driven by higher fuel and food prices. The Energy Fiji Limited electricity tariff surcharge and May’s fuel price increase are expected to add a further 0.5 and 0.9 percentage points, respectively, to overall inflation.
Visitor arrivals growth moderated to just under five per cent cumulatively to April, down from seven per cent in March, amid softer travel demand and rising airfares. Gold production fell 31.6 per cent, while mineral water output declined 1.7 per cent and mahogany production dropped 23.1 per cent.
On a positive note, new investment lending surged 78.6 per cent to FJD$532.7 million cumulatively to April, driven by real estate and construction sectors. Private sector credit grew 12.5 per cent in April, supported by ample liquidity of FJD$1.6 billion.
Foreign reserves stood at FJD$3.4 billion as of 28 May, covering about five months of retained imports. However, the RBF noted that ongoing volatility in global fuel prices and freight costs may exert earlier-than-anticipated pressure on reserves.
“Risks to the outlook remain tilted to the downside,” the RBF said, adding that the electricity tariff hike is expected to raise business costs, disrupt production, and weigh on confidence. The central bank said it stands ready to implement appropriate measures to preserve macroeconomic stability.
Source: RBF May Economic Review
