Moody's affirmed Fiji's issuer ratings and raised itsoutlook on the ratings to positive from stable.

The rating agency said May 6 that it raised Fiji's local-currencybond and deposit ceilings and affirmed its foreign- and local-currency issuerratings at B1. The country's foreign-currency senior unsecured rating wasaffirmed at B1.

The outlook upgrade was driven by expectations of sustainedhigher economic growth and macroeconomic stability over the medium term, aswell as the likelihood that the sovereign credit profile will continue tostrengthen due to lower political risk, policy reforms and improved fundingconditions.

Fiji's economic performance suggests it has transitioned tohigher, more stable growth, with real GDP growing above 4% for the thirdconsecutive year in 2015, the rating agency said. The rapid growth has beenaccompanied by low inflation, stability in the balance of payments and robustforeign exchange reserves.

An upgrade of Fiji's ratings could result from evidence thateconomic recovery following Tropical Cycle Winston will endure and allow areturn to fiscal consolidation. Further strengthening in Fiji's fiscal metricsand external payments position would be credit positive.

A downgrade in Fiji's ratings is unlikely in the short termgiven the positive outlook, which could be lowered to stable if growth, fiscaland debt trends are weaker than Moody's anticipates. The reemergence ofdomestic political risks or balance of payments strains would also be creditnegative.