Tonga’s economic performance remain positive in the medium term. The level of foreign reserves is also expected to remain at comfortable levels, supported by expected higher receipts of budgetary support and grant funds from development partners and expected higher receipts of remittances. This will be partially offset by the anticipated increase in imports and the Government’s external loan repayments. Inflation is expected to fall below the Reserve Bank’s inflation reference rate of 5% per annum at the end of 2018. The Reserve Bank will continue to closely monitor developments in the domestic and global economies to ensure financial and macroeconomic stability are maintained and to change its monetary policy setting where necessary to support its monetary policy objectives.

The Reserve Bank’s outlook for strong domestic economic activity remains in the medium term. The level of foreign reserves is also expected to remain at comfortable levels, supported by expected higher receipts of budgetary support and grant funds from development partners and expected higher receipts of remittances. This will be partially offset by the anticipated increase in imports and the Government’s external loan repayments. Inflation is expected to fall below the Reserve Bank’s inflation reference rate of 5% per annum at the end of 2018. The Reserve Bank will continue to closely monitor developments in the domestic and global economies to ensure financial and macroeconomic stability are maintained and to change its monetary policy setting where necessary to support its monetary policy objectives.

The 2017/18 financial year is drawing to an end and the Reserve Bank still expects Tonga’s economic growth to remain above 3% for 2017/18. The level of foreign reserves remained at comfortable levels and is expected to remain above the 3 - 4 months of import cover in the near term supported by higher receipts of remittances and foreign aid. The Government’s external loan repayments and the projected rise in imports will put pressure on the level of foreign reserves. Inflation is anticipated to fall below the Reserve Bank’s inflation reference rate of 5% per annum at the end of 2018. The banking system is expected to continue to remain strong. In light of the above, the Reserve Bank maintained its current monetary policy measures and will continue to remain vigilant, closely monitor developments in the domestic and global economies and may change its monetary policy setting to support its monetary policy objectives.

Tonga’s economic growth prospects remains positive in the medium term. The level of foreign reserves is expected to remain at comfortable levels and inflation is anticipated to fall below the Reserve Bank’s inflation reference rate of 5% per annum by the end of 2018. The banking system continued to remain strong. Against this background, the Reserve Bank’s current accommodative monetary policy measures are maintained. Nevertheless, the Reserve Bank will continue to remain vigilant, closely monitor developments in the domestic and global economies and the implications on the monetary policy objectives.

The Statistics Department recently released Tonga’s 2016-17 Real Gross Domestic Product (GDP) of 5.0% reaching its highest growth since 1998-99. Over the month, recovery works from the destruction caused by Tropical Cyclone (TC) Gita contributed to driving domestic economic activities. Partial economic indicators were positive over the month. The total agricultural exports increased by 335.5 tonnes mainly driven by a rise in exported volume of root crops and coconuts. Activities in the secondary industry remained positive supported by loans to respective sectors in the industry. Individual housing and business manufacturing loans increased by 0.5% and 2.8% respectively. In the tertiary sector, total loans slightly rose by 0.9% over the month. Nonetheless, container registrations rose by 493 containers as both private and business containers increased by 339 and 154 respectively, reflecting the in-kind donations and picking up of trade activities following the cyclone. International air arrivals also increased by 9.0%.

Domestic economic activities in February 2018 were affected due to the devastation by Tropical Cyclone (TC) Gita, which would also be reflected in the economic activities of upcoming months. However, partial economic indicators were mixed over the month. The total agricultural exports declined by 210.7 tonnes mainly driven by a decrease in exported volume of root crops such as cassava and giant taro. Additionally, exported marine products (excluding aquarium products) rose by 10.4 tonnes as more tuna was exported during the month. Activities in the secondary sector remained positive. Individual housing and business construction loans increased whilst business manufacturing loans declined. In the tertiary sector, total loans slightly rose by 0.5% over the month. Nonetheless, container registrations decreased by 184 containers as both business and private containers declined by 14.0% and 39.1% respectively. Vehicle registrations also fell by 204 registrations, due mainly to lower registrations for cars and other light vehicles. This was followed by a 38.8% decline in air arrivals.

Monthly economic indicators mirrored usual trend in January of every year showing slower growth in economic activities. According to the Reserve Bank liaison program, the supply of root crops in the domestic market were abundant whilst the supply of local fruits and vegetables declined due to seasonality. The total agricultural export volume continued to fall over the month of January by 97.7 tonnes, due to a decrease in the export of coconuts and squash although the volume of exported root crops increased. Performance of the secondary sector slowed over the month as individual housing and business manufacturing loans declined. Business construction loans, on the contrary, slightly rose by 7.7%. The tertiary sector slightly improved over the month, supported by the rise in total lending particularly higher lending to the trade and tourism sectors which rose by 21.4% and 27.1% respectively. Although total air arrival passengers declined by 29.9%, travel receipts slightly rose to $10.2 million from $10.0 million last month.

The performance of all sectors of the domestic economy was favorable except for the agricultural sector recording lower export volume. The on-going construction activities continued to boost the performance of the secondary sector, which coincided with a 2.3% and 4.2% growth in individual housing loans and loans for business construction respectively. The tertiary sector improved over the month. Total lending rose by $16.4 million (3.9%). Total air arrivals increased by 64.9%, as people travelled for vacation and to spend Christmas with their respective families. The rise in total international arrivals is in line with a $3.1 million rise in travel receipts. In addition, total number of container registrations increased by 249 (24.8%), as both private and business containers rose by 40.0% and 11.4% respectively. Similar to previous years, total vehicle registrations rose by 142 during the month, due to higher light and heavy vehicles and cars registered. Electricity production slightly increased by 4.8% and 62 more customers were recorded during the month. Agricultural exports on the other hand declined by 56% largely due to the end of the squash season.

Partial indicators of domestic activity were mixed in November but overall, broadly positive. According to the Reserve Bank’s liaison program with growers in the domestic agricultural market, availability of crops during November was favorable compared to last month. Electricity consumption rose by 3.2%, and 79 more customers were recorded during the month. On-going construction activity continued to boost performance in the secondary sector, which coincided with a 1.0% growth in individual housing loans. The financial sector remained strong during the month, and lending increased by $2.3 million. On the other hand, other partial indicators in the tertiary sector declined. Total air arrivals declined by 1.9%, in line with a $3.2 million decrease in travel receipts. In addition, total number of container registrations decreased by 20 (2.0%), attributed to the lower number of business containers which outweighed the slight increase in private containers.

Domestic economic activities remained positive in October 2016 with mixed indicators. The total agricultural export volumes rose by 2,513.4 tonnes over the month. This is the highest total monthly exports on record since October 2013 reflecting the commencement of the squash season. The secondary sector remained strong, supported by rises in individual housing loans and business loans for the construction and manufacturing sectors. Vehicle registrations rose in October by 65 vehicles (23.1%), whilst container registrations slightly fell by 4 containers (0.5%).Activities in the financial sector were supported by higher credit growth during the month. Air arrivals declined in October however the arrival of the Costa Luminosa, the largest cruise ship to arrive in Tonga supported the tourism sector. Whale watching activities also continued to benefit this sector.