Asia Regional Integration Center

The economy grew by 3.9% in 2017 with recovery in agriculture, continued growth in tourist arrivals, and post-Cyclone Winston reconstruction. Record tourism arrivals (with growth in visitor arrivals from New Zealand, North America and Australia) contributed to 5.8% growth in accommodation and food services in 2017, reversing a decline of 6.3% in 2016.

The deficit for fiscal year 2017 (FY2017, ended 31 August 2017) was equal 2.3% of GDP, significantly smaller than the 4.1% deficit in FY2016. Monetary policy remained accommodative as the policy interest rate stayed at 0.5% throughout 2017. Liquidity improved significantly, largely from increased foreign reserves while private sector credit increased—albeit more slowly than in 2016—by 11.6% to the equivalent of 71.7% of GDP. The current account deficit is estimated at the equivalent of 5.2% of GDP in 2017, marginally higher than in the previous year.

Growth is projected to decelerate to 3.6% in 2018 and to 3.3% in 2019, with tourism, agriculture, and construction expected to be the major contributors. Inflation, which slowed to 3.3% in 2017, is expected to moderate in 2018 and 2019. With higher earnings from tourism and remittances, the current account deficit is forecast to narrow to 5.0% of GDP in 2018 and 4.8% in 2019.