Tourism in Fiji - Economy

Economy

Fiji, endowed with forest, mineral, and fish resources, is one of the more developed of the Pacific island economies, though still with a large subsistence sector. Natural resources include timber, fish, gold, copper, offshore oil and hydropower. Fiji experienced a period of rapid growth in the 1960s and 1970s but stagnated in the 1980s. The coup of 1987 caused further contraction.

Economic liberalization in the years following the coup created a boom in the garment industry and a steady growth rate despite growing uncertainty of land tenure in the sugar industry. The expiration of leases for sugar cane farmers (along with reduced farm and factory efficiency) has led to a decline in sugar production despite a subsidized price. Subsidies for sugar have been provided by the EU and Fiji has been the second largest beneficiary after Mauritius.

Urbanization and expansion in the service sector have contributed to recent GDP growth. Sugar exports and a rapidly growing tourist industry — with 430,800 tourists in 2003 and increasing in the subsequent years — are the major sources of foreign exchange. Fiji is highly dependent on tourism for revenue. Sugar processing makes up one-third of industrial activity. Long-term problems include low investment and uncertain property rights. The political turmoil in Fiji has had a severe impact on the economy, which shrank by 2.8% in 2000 and grew by only 1% in 2001.

The tourism sector recovered quickly, however, with visitor arrivals reaching pre-coup levels again during 2002, which has since resulted in a modest economic recovery. This recovery continued into 2003 and 2004 but grew by 1.7% in 2005 and grew by 2.0% in 2006. Although inflation is low, the policy indicator rate of the Reserve Bank of Fiji was raised by 1% to 3.25% in February 2006 due to fears of excessive consumption financed by debt. Lower interest rates have so far not produced greater investment for exports.

However, there has been a housing boom from declining commercial mortgage rates. The tallest building in Fiji is the fourteen-storey Reserve Bank of Fiji Building in Suva, which was inaugurated in 1984. The Suva Central Commercial Centre, which opened in November 2005, was planned to outrank the Reserve Bank building at seventeen stories, but last-minute design changes made sure that the Reserve Bank building remains the tallest.

Trade and investment with Fiji has been criticized due to the country's military dictatorship. In 2008, Fiji's interim Prime Minister and coup leader Frank Bainimarama announced election delays and that it would pull out of the Pacific Islands Forum in Niue, where Bainimarama would have met with Australian Prime Minister Kevin Rudd and New Zealand Prime Minister Helen Clark.

The South Pacific Stock Exchange (SPSE) is the only licensed securities exchange in Fiji and is based in Suva. Its vision is to become a regional exchange.