The economic importance of the sugar industry for Fiji

For over a century, the sugar industry has been perceived as the backbone of the Fijian economy, given its contributions to gross domestic product (GDP) and employment generation. However, due to the non-renewal of land leases and the gradual withdrawal of the preferential prices by the European Union, the industry is on the verge of collapse. We use the Fiji computable general equilibrium model to simulate the economy-wide impact of a 30% reduction in sugar production. Amongst our key results, we find that in the long-run a 30% reduction in sugar production leads to a 2.1% fall in exports, and government expenditure and real consumption fall by 1.9 and 1.6%, respectively. These declines in the aggregate demand components are reflected in a fall of around 1.8% in Fiji’s GDP. The negative repercussion of declining economic growth is reflected in a 1.5% decline in real national welfare.