Domestic economic growth forecasts for Tonga remain gloomy, underpinned by the slow recovery of the primary sector and lower-than-expected pickup in the performance of the industry and services sectors. Escalating trade tensions in developed economies disrupts global growth and inflation, while intensifying policy uncertainties. This is expected to have negative spillovers on Tonga’s domestic growth.

The NRBT has taken measures to modernize its monetary policy framework and strengthen the monetary policy transmission mechanism to optimize its impact on inflation, in line with recommendations from the IMF. These measures are outlined in the Monetary Policy Statement February 2025. Other measures in coordination with the Government will be explored to address the high cost of living and achieve broader macroeconomic stability.

Risks to inflation are high as global uncertainties remain. Trump’s proposed tariff policies will have implications on imported inflation. More work is still needed to curb the rising cost of living by bringing down sticky prices, particularly the core items. Amble foreign reserves and strong capital positions keeps the financial system stable. Credit growth is trending up, but anticipated vulnerabilities to asset quality are starting to materialize, prompting prudent response by the NRBT to curtail risks to the financial system.

The recovery path of the world economy still involves a high level of uncertainty given escalating country conflicts, geopolitical tensions, and fears of trade protectionism. These will impact the Tongan economy negatively as we remain vulnerable to external shocks. The outlook for the Tongan economy to continue recovering remains, but it is not without its challenges. The recent shift in political power and the delay in the change of government may disrupt government operations and major projects in the pipeline.

Outlook for the Tongan economy remains positive, supported by infrastructure projects, tourism, and domestic events. However, global geopolitical tensions, potential disruptions to trade, and the upcoming cyclone season could pose downside risks. Inflation is currently below the 5% reference rate but the NRBT continues to closely monitor the inflationary environment and will adjust its policies accordingly. The overall financial system maintains stability with high liquidity but risks to asset quality and capital positions are tilted to the downside.

Outlook for the Tongan economy remains positive, supported by infrastructure projects, tourism, and domestic events. Inflation is currently below the 5% reference rate but the NRBT continues to closely monitor the inflationary environment and will adjust its policies accordingly. Foreign reserves are expected to remain at comfortable levels, above the IMF’s prescribed level of 7.5 months of imports cover in the near to medium term.

The overall economic outlook remains positive, supported by infrastructure projects, tourism, and domestic events. The NRBT will closely monitor the inflationary environment and implement appropriate monetary policy measure to maintain price stability. The Reserve Bank is currently reviewing its monetary policy tools in light of the current macro-economic conditions to continue and ensure both price and financial stability.

The overall economic outlook remains positive, supported by infrastructure projects, tourism, and domestic events. The NRBT will closely monitor the inflationary environment and implement appropriate monetary policy measures to maintain price stability. The Reserve Bank is currently reviewing its monetary policy tools in light of the current macro-economic conditions to continue and ensure price stability as well as support economic recovery.

The NRBT has projected a moderate growth of 2.6% for Tonga’s economy for the FY 2025. Major infrastructure projects, an anticipated influx of visitors for events such as the Pacific Islands Forum meeting, and the annual local festivities are expected to help contribute to this growth. The Reserve Bank is currently reviewing its monetary policy tools in light of the current macro-economic conditions to continue and ensure price stability as well as financial stability.

Moderate GDP growth is expected for FY 2024 as the economy gradually recovers from the 2022 disasters. NRBT has revised its projection indicating that inflation may rise above the 5% reference rate in the near term. Nonetheless, foreign reserves are projected to remain above the IMF’s prescribed level of 7.5 months of imports cover in the near to medium term. The banking system maintains high liquidity and sufficient capital reserves to absorb potential future shocks. The Reserve Bank will continue to closely monitor inflation trends while also supporting economic recovery efforts.