The NRBT expects the headline inflation to continue remaining below the 5% reference rate for the most part of 2024. Foreign reserves, are still at comfortable levels and projected to remain above the IMF’s prescribed level of 7.5 months of imports cover in the near to medium term. The financial system remains stable, characterized by high liquidity and banks maintaining sufficient capital reserves to withstand potential future shocks.

The NRBT expects the headline inflation to continue to stabilise, remaining below the 5% reference rate for the next part of 2024. An expectation of a further decline in the global oil price through the year helps support this forecast. The financial system continues to remain stable with ample liquidity available as well as the banks maintaining adequate capital reserves to absorb potential future shocks to the financial system. The Reserve Bank will continue to closely monitor inflation movements and at the same time support economic recovery.

The primary focus of the NRBT remains on inflation, GDP growth, and maintaining financial stability. We anticipate inflation to maintain a downward trend, staying below 5% throughout 2024, with the expectation of decreasing global oil prices. Nonetheless, the ongoing international conflict and tensions pose risks of disrupting oil supplies, potentially pressuring petroleum prices upwards. Additionally, the recent El Niño event has affected local food supply, likely exerting further upward pressure on prices.

Foreign reserves, are still at comfortable levels and is projected to remain above the IMF’s prescribed level of 7.5 months of imports cover in the near to medium term. The financial system continues to remain stable with ample liquidity and the banking system is also well capitalized to absorb further shocks. Global oil prices have recently eased due to supply cuts by OPEC and oil producing countries. The continual uncertainties surrounding the Israel-Hamas war and geopolitical tensions in the Middle East are threatening to disrupt oil supplies from the region putting pressures on petroleum prices. The El Nino weather conditions affecting local food supply coupled with an expected rebound in demand and consumption during the holiday season are also anticipated to put further upward pressure on prices. GDP growth for the current financial year is anticipated to be moderate and inflation has come down below 5%. However, core inflation remains high and there is a risk that headline inflation may rebound again above the 5% reference rate due to volatility of local food prices. The Reserve Bank will continue to closely monitor inflation movements and at the same time support economic recovery.

The NRBT expects decline in headline inflation, staying below the 5% range. This expectation hinges on stable global oil prices, assuming no significant spikes. Locally, any worsening in food supply could also escalate domestic inflation. The GDP growth for the current financial year is expected to be moderate, with domestic production remaining below potential. Tonga's foreign reserves are projected to remain robust, comfortably above the IMF's recommended seven and a half months of import coverage. The financial system is stable, characterized by ample liquidity. The NRBT will maintain vigilant monitoring of inflation trends while supporting the economy's recovery efforts.

Headline inflation has rebounded above the 5% reference rate as local food CPI hit its highest level on record and core inflation is still high. Global oil prices have seen declines recently after surging on the back of supply cuts by OPEC and oil producing countries. The continual uncertainties surrounding the Israel-Hamas war and geopolitical tensions in the Middle East are threatening to disrupt oil supplies from the region putting pressures on petroleum prices. The El Nino weather conditions affecting local food supply coupled with an expected rebound in demand and consumption during the holiday season are also anticipated to put further upward pressure on prices. GDP growth for the current financial year is anticipated to be moderate while domestic production is estimated to be still below potential thus allowing ample policy space for the Reserve Bank to support stronger economic growth without causing major inflationary pressure to the economy. Foreign reserves, are still at comfortable levels and is projected to remain above the IMF’s prescribed level of 7.5 months of imports cover in the near to medium term. The financial system continues to remain stable with ample liquidity and banks are also well capitalized to absorb further shocks. The Reserve Bank will continue to closely monitor inflation movements and at the same time support economic recovery.

The primary sector trended favourably in August 2023. Activities in the industrial sector remained vibrant over the month given the ongoing public and private projects. The tertiary sector slowed in August 2023 after the celebrations and festivals in prior months.

The primary sector show mixed outcomes over the month. Credit to the industrial sector showed active performances in July 2023. Indicators in the services sector remained highly favourable, given the ongoing festivals in July 2023. 

The primary sector demonstrated mixed performances over the month. Lending to the secondary sector generally slowed down over the month, and the services sector remained upbeat over the month.

The primary sector was buoyed by higher agricultural exports during the month. Agricultural exports increased by 28.8 tonnes (4.1%), stemming from higher exports of cassava, squash (off-season export), and coconut.