FJGB10 Reflects Fiji Economic Growth Adjustments

Fiji’s macroeconomy is transitioning into a moderating phase following a strong, tourism-led post-pandemic rebound. Gross Domestic Product (GDP) growth for the 2025 fiscal year is projected to slow to approximately 3.2% (revised from earlier, higher estimates), down from the robust growth recorded in the prior year (estimated near 4.0% for 2024). This deceleration reflects both base effects from the rapid rebound and a plateauing in tourism receipts, which constitute a major source of foreign exchange earnings.

The resilience of the domestic economy is largely anchored by external private inflows. Mechanistically, remittances continue to underpin household consumption, which has maintained notable growth. These inflows cushion domestic demand and offset the slowing momentum in the service sectors. Meanwhile, fiscal policy remains mildly expansionary, with the government budget envisaging an overall deficit of approximately 4.4% of GDP in FY2025 (according to recent international reports, reflecting continued high capital spending). The

Reserve Bank of Fiji (RBF) has maintained an accommodative monetary stance, keeping the Overnight Policy Rate (OPR) at 0.25% to balance growth support against inflation, which remains contained at low levels, recently falling into negative territory (e.g., -0.4% in July 2025). Sectoral effects are mixed: construction activity is facing a deceleration, while agriculture and fisheries remain structurally constrained by climate variability and emigration-driven labor shortages.

Financial markets are responding to these dynamics cautiously. Fiji Government Bond yields (FJGB10) are trading near 5.9% (an indicative market rate), a level that incorporates both low domestic inflation expectations and a persistent small island developing state sovereign risk premia, particularly concerning climate vulnerability and high public debt (estimated near 77.7% of GDP for 2025). Historically, periods of moderated growth after sharp rebounds are typically associated with prudent fiscal and monetary management, emphasizing structural consolidation and external stability over unsustainable headline GDP gains.

Forward-looking, growth is expected to stabilize near its long-term trend of around 3.0%–3.2% over the next 12–18 months. This outcome is conditional on tourism arrivals maintaining their current levels (avoiding significant declines), remittance inflows remaining robust, and the absence of major climate shocks. Key indicators for monitoring the sustainability of this moderate growth will include tourism arrival numbers, remittance trends, the spreads on FJGB10 yields, and the execution rates of infrastructure spending aimed at expanding economic capacity.