13 April, 2018, 12:00 am
WHILE gross domestic product (GDP) growth is expected to remain above-trend this year, the World Bank has highlighted several risks that could cloud the outlook.
In its latest report: East Asia and Pacific Economic Update April 2018: Enhancing Potential released this week, the bank said GDP growth was estimated to have accelerated to 3.8 per cent in 2017 from the sharp slowdown in 2016 in the wake of Cyclone Winston in 2016 (0.4 per cent).
This year, GDP growth is expected to remain above-trend, moderating to 3.5 per cent in 2018 and around 3.0-3.5 per cent in the medium term, in line with potential growth.
According to the World Bank, potential upside risks to growth include lower-than-expected import commodity prices and stronger-than-expected tourism because of the introduction of three flights a week to Japan from July 2018.
The bank also indicated other downside risks which include another natural disaster and a sharp slowdown in China, which could hit Fiji’s main export and tourism source markets such as Australia, New Zealand, and Japan.
Uncertainty ahead of the next general election, which can take place anytime between May and November this year, could slow hard-to-unwind capital investment by the private sector, the report noted.
While Fiji is exposed to frequent natural disasters, causing an average loss of between two and five per cent of GDP, the recent natural disasters experienced in the country could possibly cause sharp increases in inflation.
In 2016, Cyclone Winston affected close to two-thirds of the population and caused a loss of nearly a third of GDP.
With climate change, the World Bank further noted that its expected losses would increase to 2.5 to 6.5 per cent a year by 2050 as per the Pacific Catastrophe Risk Assessment and Financing Initiative (PCRAFI) and Fiji Climate Vulnerability Assessment 2017.
The report further stated that attracting more foreign direct investment and expanding the role of the private sector in the economy will require modernising the legal and regulatory framework.
The report also noted that the time spent dealing with multiple approval procedures is raising the costs of doing business, especially for small firms (SMEs).
Ease of Doing Business in Fiji averaged 73.40 from 2008 until 2017, reaching an all-time high of 101 in 2017 and a record low of 43 in 2008.
Fiji’s ranking deteriorated to 101 for the World Bank’s standings in 2017 from 97 slipping from the previous years despite strong efforts to improve the ranking.
The ease of doing business index ranks countries against each other based on how the regulatory environment is conducive to business operation stronger protections of property rights.
Economies with a high rank (1 to 20) have simpler and friendlier regulations for businesses.
It is also understood that Government is digitising several processes involved in doing business which is expected to ease costs of doing business in the country.