Economy

In 2011, the domestic economy is estimated to have grown by 2.1 percent, largely underpinned by activity in the primary and service-oriented sectors (Graph 6). In the primary sectors, increased non-cane crop production given the recovery from cyclone damage combined with the rebound in cane production from the 2010-record low-level, underscored the largest contribution by the agriculture industry to the 2011 growth outcome. In the services sector, increased financial intermediation, and robust hotels, restaurants and transportation activities resulted in major contributions to total output in 2011.

 Graph 6
                                            
 

In contrast, activities in the public administration & defense; mining & quarrying; fishing; construction; health & social work and the electricity & water sectors, are expected to have contributed negatively towards overall growth. While the 2011 growth is estimated to be the highest in the past five years, it reflects the economy rebounding after two consecutive years’ economic contractions.

For 2012, growth is envisaged at 2.3 percent. The industrial sector is expected to lead growth as per the envisaged rebound in the manufacturing, mining & quarrying and construction sectors. For the primary industries, higher cane, non cane agriculture, timber (particularly pine) and fish production are expected to underpin activity in Fiji’s natural sources sector. In the services category, tourism activity’s set to strengthen further in 2012.Notably, the rise in civil service pay and reduced personal income tax rates announced in the 2012 National Budget, should support consumer spending and the associated retail & wholesale activities and by extension, overall economic activity.

In addition, the reduction in the corporate tax rate and fiscal duties on imports of certain raw materials and capital equipment should encourage business investment spending, recruitment intentions and consequently raise production. Moreover, the easing of certain exchange control policies and

Government’s firm commitment to improving the investment environment should augur well for investment, both from foreign and domestic sources. Economic growth for 2013 and 2014 is projected at 1.9 percent and 2.1 percent respectively. Risks to this outlook include any negative implication of the European debt crisis-induced global economic downturn that may slow domestic economic activity, particularly tourism and export demand, remittance inflows and foreign direct investment.