AS Fiji prepares for a return to a democratically-elected government, progress towards the election has led to increasing confidence in the economy, the International Monetary Fund has revealed.
According to IMF Asia and Pacific Department assistant director Chikahisa Sumi, this will also be supported by increased disposable income and credit expansion.
An IMF mission was in the country last month to conduct discussions with Fijian authorities.
Mr Sumi said GDP growth was projected to accelerate to 3.8 per cent this year, well above the average growth rate over the past decade.
"There are both domestic and external risks to the outlook. Domestic risks are focused on the complex political situation," he said in a statement.
"On the upside, successful election and a smooth transition to reform-oriented democratic government could result in stronger confidence in the economy and higher capital inflows," he said.
On the external risks, he said Australia and New Zealand, the two most important tourism markets for Fiji, could be adversely affected by lower commodity demand from China and elsewhere.
IMF said inflation had remained low partly because of low import prices but pervasive price controls clouded inflation assessment. And while good progress had been made in recent years, it stated structural reforms needed to continue for the country to achieve sustainably high growth and increase resilience to external shocks.
The IMF executive board is expected to discuss the 2014 Article IV consultation in October, this year.