Tonga’s economic outlook is good, according to the International Monetary Fund.
In its latest report, the IMF said the kingdom’s GDP was projected to grow by 3.4 percent in the 2018 fiscal year, driven by construction, agriculture and tourism.
Inflation was expected to decline.
However, there was expected to be a large deficit in the current account balance in 2018.
This would be caused by capital imports for construction, which would be financed through donor account and capital account expenditure.
Public debt was expected to rise as a percentage of GDP.
Money sent to Tonga from Tongans working overseas was expected to increase currency reserves.
The IMF has advised the government to focus on self-funded projects that are more likely to deliver long term returns, such as education, health, and roads, and building resilience to natural disasters.
The Foreign exchange levy imposed in 2016 should be replaced by a non-distortionary tax and be phased out no later than 2020.
Tonga has enjoyed robust economic growth in recent years.
Growth was 2.7 percent in the 2017 fiscal year, following 3.4 percent in FY2016, supported by construction, agriculture, tourism, strong remittances, and strong private credit growth.
Inflation spiked in 2017 because of a new import tax and higher local food prices.
The main points
- Tonga’s economic outlook is good, according to the International Monetary Fund.
- In its latest report, the IMF said the kingdom’s GDP was projected to grow by 3.4 percent in the 2018 fiscal year, driven by construction, agriculture and tourism.
- Inflation was expected to decline.
For more information
IMF Executive Board Concludes 2017 Article IV Consultation with Tonga
