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Fijian Currency
photo: New Zealand Pacific Radio
A Fijian economist says at least three percent of Fiji’s population has left the country due to a host of issues that the Coalition Government must address in the upcoming budget.
Inflation, unemployment, high living costs, labour shortages and government debt are among a host of challenges plaguing Fiji’s economy as it struggles to control a spreading drug crisis that authorities fear will turn the country into a “zombie state”.
As a result, thousands of Fijians chose to migrate to wider lands, especially Australia and New Zealand. Most of them are skilled and semi-skilled workers, accounting for about 15% of the total workforce.
According to government statistics, more than 70,000 people have left the country in the past 18 months, seeking short-term and long-term education and employment opportunities.
“No economy can afford to lose 3 per cent of its best talent,” Professor Satish Chand from the University of New South Wales told RNZ Pacific ahead of Fiji’s budget. “That’s a huge loss.”
Last week, the country’s Macroeconomic Committee Revised GDP growth forecast for 2024 The November 2023 forecast of 3.4% fell to 2.8%.
“Despite buoyant remittance inflows and rising incomes, consumer expenditure growth has slowed due to the large number of Fijian citizens emigrating abroad,” said Arif Ali, chairman of the committee and governor of the Reserve Bank of Fiji.
“The economic performance was also affected by rising living costs, as inflation surged to 7.1% in April 2024, and lower-than-expected government spending, the latter of which was affected by capacity constraints.”
Professor Chand said instability and better job prospects in New Zealand or Australia could be the reason for the loss of human capital.
But he added that Prime Minister Sitiweni Rabuka’s coalition government must understand the causes of the problem and find solutions to make up for the shortfall.
“We don’t have enough skills in our economy to fill the growing talent gap.
“On the one hand we have unemployment and on the other we have a severe shortage of construction skills in the accommodation sector.”
He said it was important to “focus on growing the economy”.
He noted that a long-standing problem facing Fiji is a lack of investor confidence.
“At least for the previous (Fiji First) government, they were very aggressive in social spending to reduce the impact of the (COVID-19) pandemic. That’s what led to the (national) debt being close to 100 per cent of GDP).
“Debt levels have gone up, but GDP has shrunk. That in itself has added additional debt.”
Professor Chand said the current coalition must carefully consider reducing debt.
“They (the Fijian government) need to be very careful not to overdo it by cutting public spending and raising revenues, which would increase suffering for local residents and also reduce economic growth.”
Labour leader and former prime minister Mahendra Chaudhry shared the same view.
“The FLP believes that domestic debt levels are manageable and can support the financing of the budget deficit. However, the FLP strongly recommends reducing the nominal amount of external debt by ensuring that debt repayments take priority over new external debt.
“Now is not the time for austerity. To raise public servants’ salaries in line with inflation and make much-needed capital investments, the budget will need to run a deficit of around 6% of GDP.”
The Liberals say the coalition government has failed to adequately invest in basic infrastructure such as health care, water and roads, investments that are critical to stimulating the economy.
Tourism supports the economy
The tourism sector contributes 35 per cent to economic activity and had recovered to pre-COVID-19 levels before the budget was released.
But the industry must contend with capacity constraints.
According to the Fiji Tourism Authority, May was one of the busiest months ever for tourist arrivals to Fiji, with more than 82,000 visitors.
Tourism activity also generated an estimated FJD 296 million for the economy.
“Tourism has rebounded dramatically,” Professor Chand said.
“But we are facing capacity constraints. We are at the limit in terms of accommodation and labor in this particular industry.”
He said the government must maintain this situation for the long term.
Fiji’s Deputy Prime Minister and Finance Minister Biman Prasad will present the budget at 9:30am on Friday.
He is expected to address some of the major issues that are holding back the country’s development.
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