Ratings On Fiji Affirmed At 'B/B' On Continued Stabilization Of External Position; Outlook Remains Stable

Standard & Poor's Ratings Services said today that it had affirmed its foreign and local currency issuer credit ratings on the Republic of Fiji at 'B/B'. The outlook remains stable. The affirmation reflects our view that Fiji has continued to stabilize its external position, including its level of foreign exchange reserves. However, the country's persistent fiscal and current account deficits, weak economic growth and institutional settings, as well as deficiencies in available data partly offset the improvement. "Political uncertainty, weak investment, and low productivity further reduce Fiji's growth prospects. While the economy improved in the past two years after a very weak performance, we expect growth to remain low without further progress in structural reforms," Standard & Poor's credit analyst Kim Eng Tan said. "Fiji's credit quality remains vulnerable to external shocks associated with the durability of the global economic recovery, adverse weather conditions, and changes in tourism preferences. These factors underscore the downside bias in Fiji's growth outlook. We also believe that Fiji's debt burden and contingent liabilities are high for a country faced with these vulnerabilities." The stable outlook reflects our expectation that Fiji's external position will continue to improve, including in the level of foreign exchange reserves, supported by a continuing recovery in agricultural exports and the tourism sector. Standard & Poor's may raise the ratings if improvements occur in one of several areas, including: Fiji's growth prospects through greater political certainty and structural reforms; further liberalization in capital and price controls and in exchange rate management; improved external indicators; or a falling government debt trajectory. On the other hand, the ratings could be lowered if political pressures intensify or if public finances and external imbalances worsen, leading to sharply lower reserves.

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