Fiji is one of the more developed of the Pacific island economies, although it remains a developing country with a large subsistence agriculture sector. For many years sugar and textile exports drove Fiji's economy. However, neither industry is competing effectively in globalized markets. Fiji's sugar industry suffers from quality concerns, poor administration, and the phasing out of a preferential price agreement with the European Union beginning in 2006/2007. The European Union has promised a large amount of financial aid to assist the ailing sugar industry, but, post-coup, has clarified that the aid will only be forthcoming if Fiji cleans up its human rights situation and moves quickly to democracy.
In 2005, the textile industry in Fiji markedly declined following the end of the quota system under the Agreement on Textiles and Clothing (ATC) and the full integration of textiles into WTO General Agreement on Trade and Tariffs. The income from garments plummeted by 47% in 2005 with the end of the ATC quotas. Garments now account for approximately 12% of Fiji's exports and sugar approximately 22%. Other important export crops include coconuts and ginger, although production levels of both are declining. Fiji has extensive mahogany timber reserves, which are only now being exploited. Fishing is an important export and local food source. Gold is also an important, albeit troubled, export industry for Fiji.
The most important manufacturing activities are the processing of sugar and fish. Since 2000 the export of still mineral water, mainly to the United States, has expanded rapidly. By the end of 2006, water exports totaled around U.S. $52 million per year, an increase of 28% over 2005 and an increase of 775% since 2000.
During 2007, GDP declined by 6.6%, largely as a result of the December 2006 coup. GDP growth rate in 2006 was 3.6%.
In recent years, growth in Fiji has been largely driven by a strong tourism industry. Tourism expanded rapidly since the early 1980s and is the leading economic activity in the islands. However, the December 2006 coup led to an overall decline in tourist arrivals during 2007. About one-third of Fiji's visitors come from Australia, with large contingents also coming from New Zealand, the United States, the United Kingdom, and Japan. In 2007, more than 62,000, or around 12%, of the tourists were American, a number that had steadily increased since the start of regularly scheduled nonstop air service from Los Angeles. In 2006, Fiji's gross earnings from tourism were about $445.9 million, an amount double the revenue from its two largest goods exports (sugar and garments). Gross earnings from tourism continue to be Fiji's major source of foreign currency.
Fiji runs a persistently large trade deficit, F$1.6 billion (U.S. $1.03 billion) for 2007, although tourism revenues yield a services surplus. Australia accounts for between 25% and 35% of Fiji's foods trade, with New Zealand, Singapore, the United States, the United Kingdom, and Japan varying year-by-year between 5% and 20% each. Since the 1960s, Fiji has had a high rate of emigration, particularly of Indo-Fijians in search of better economic opportunities. This has been particularly true of persons with education and skills. The economic and political uncertainties following the coups have added to the outward flow by persons of all ethnic groups. In recent years, indigenous Fijians also have begun to emigrate in large numbers, often to seek employment as home health care workers. Remittances from overseas workers, often undocumented, are second only to tourism as a source of foreign exchange earnings.
Inflation increased dramatically in 2008, reaching an 18-year high of 9.5% in August 2008. This was due to higher oil prices and the rise in global food prices.
Information by U.S. Department of State