Inflation alone not a trigger for recession, says RBF Governor

Elevated inflation on its own does not automatically lead to a recession, says Reserve Bank of Fiji Governor Mr Ariff Ali.

He was responding to concerns that rising inflation, driven in part by the global fuel crisis, could push Fiji’s economy into a downturn.

“Higher global fuel prices are adding to inflation pressure in Fiji, particularly as fuel is a key input across many sectors of the economy,” Mr Ali said.

He said the economic outlook would depend largely on whether external pressures are temporary or prolonged.

“For example, if global fuel prices ease in the near term, domestic economic activity is expected to remain mildly positive, although growth may be lower than earlier forecasts,” he said.

“Tourism, services and household consumption would continue to support economic activity, complemented by Government fuel-related assistance and an accommodative monetary policy stance aimed at cushioning near-term cost pressures.”

However, Mr Ali said prolonged high fuel and energy prices would weigh on economic activity.

“Higher fuel prices can slow the economy by raising the cost of living, reducing household spending, increasing business costs, delaying investment and placing downward pressure on employment, eventually leading to lower growth and, in some cases, a recession,” he said.

He said the focus was on recognising risks early, managing cost pressures, and supporting economic stability and jobs through coordinated policy responses.

Mr Ali added that households and businesses were already adjusting spending patterns and improving efficiency to manage rising costs, which could support resilience.

“The RBF continues to closely monitor inflationary pressures, foreign reserves and overall economic conditions and stands ready to take the necessary actions to safeguard macroeconomic stability,” he said.

He said close policy coordination and existing economic buffers would help reduce the risk of an economic slowdown.

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