Fiji faces tough tariffs from a position of strength

Shamal Chand
02:00pm April 28 2025

Westpac Economics has shifted their outlook for Fiji to the downside, and now expects Fiji’s economy to grow by 2.7 per cent in 2025. (Unsplash, Gary Runn)

Fiji is facing stronger than expected headwinds following US President Donald Trump’s tariffs, made worse by a slowdown in tourist arrivals from Australia and New Zealand.

Although the tariffs were reduced from a shockingly high 32 per cent to 10 per cent following Trump’s 90-day pause, Fiji is nonetheless working through its trade strategies which includes possible alternative markets for the goods it exports to the US. However, the US remains a key export market for Fiji.

As a result, Westpac Economics has shifted their outlook for Fiji to the downside, and now expects Fiji’s economy to grow by 2.7 per cent in 2025 versus its earlier projection of 3.4 per cent.

The tourism sector, a critical component of Fiji's economy and which had not been targeted by tariffs, saw a significant decline in visitor arrivals. In March, arrivals from Australia fell by 17.4 per cent year-on-year to 26,434, while arrivals from New Zealand dropped by 16.3 per cent to 10,885.

This was due to the ongoing recession in New Zealand and declines in Australian consumer expenditure which normally occurs during an election cycle.

Despite these challenges, inflation remains well-contained, with domestic inflation easing to 1.5 per cent in March while lower fuel prices are expected to further reduce headline inflation, providing some economic relief. The Fijian dollar has also shown resilience due to the pegged exchange rate regime.

Optimistically, Fiji has capacity to adapt. Its government achieved a fiscal surplus in the first quarter of 2025, driven by higher tax collections and effective compliance measures. Government spending has also lagged behind forecasts due to increased operational expenditures.

The focus now shifts to the upcoming budget to be delivered in late June which will likely focus on long-term capital investment and improving operational effectiveness. 

While challenges persist, particularly in the tourism sector, Fiji’s government has a strong foundation of fiscal discipline and should achieve good levels of growth if it focuses strategically on long-term investments. We also expect tourism numbers to lift as we pass through the current tribulations in New Zealand and Australia. 

For more analysis from Shamal Chand and the rest of the Westpac Economics team, visit WestpacIQ.  

Shamal Chand

Shamal Chand joined Westpac Fiji in March 2024 as a Senior Economist. Shamal's key area of focus includes researching, analysing, and monitoring key developments in the economic and financial markets of Fiji, Papua New Guinea, and the broader Pacific region.

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