Tonga: Economy

Increased construction and steady tourism performance reversed the downturn in Tonga. Growth is expected to accelerate this year and 2016.

Selected Economic Indicators (%) - Tonga 2015 2016
GDP Growth 2.4 2.6
Inflation 0.4 1.0
Current Account Balance (share of GDP) -4.5 -6.0

Source: ADB estimates.

Economic performance

Tonga - recovering from 2.7% contraction in Fiscal Year 2013 caused by a sharp decline in reconstruction after the end of loan-financed projects - recorded growth at 2.1% in FY2014 (ended 30 June 2014). Growth came from higher agricultural output in the first half, before the arrival of Cyclone Ian in January 2014, and recovery in construction in the wake of that cyclone.

Tourism remains a key income source for South Pacific economies. Visitor arrivals in Tonga are estimated to have been stable, at about 59,000 visitors in FY2014, following slight declines in the previous 2 years.

Economic prospects

Tourism and public infrastructure development will continue to drive growth in the South Pacific, but contributions from agriculture should increase as projects implemented with development partners boost the sector.

Tonga is expected to grow by 2.4% in FY2015 as the airport runway upgrade financed by development partners proceeds, along with preparations for the July 2015 coronation, and as major cyclone reconstruction carries over from 2014 into 2015. Following 2 years of decline, visitor arrivals in Tonga are seen to increase gradually in FY2015 and FY2016. Economic growth is forecast to accelerate to 2.6% with the expected ramping up of preparations for the 2019 South Pacific Games, executed with continuing support from development partners, and with improved agricultural production and tourism performance.

Excerpted from the Asian Development Outlook 2015.