Infrastructure spending funded by development partners has been the main determinant of fluctuations in economic growth in Tonga.

Despite a slight improvement in tourism performance, Tonga saw growth decelerate to 0.8% in fiscal year 2012 (ended 30 June 2012) from 2.9% in FY2011 as major projects wound down. Remittances continued to fall, totaling $67 million in FY2012, which was equal to 15.0% of the gross domestic product (GDP). This number is down from a high of $107 million, or 30.0% of GDP, in FY2008.

Inflation in Tonga slowed to 4.6% in FY2012 from 6.1% in FY2011 as infrastructure projects wound down and weak domestic activity relieved pressure on domestic prices. These factors offset increases in international food and fuel prices recorded in calendar year 2011, which made accelerated inflation the rule elsewhere in the South Pacific.

Source: ADB estimates.

Economic prospects

Public investments and tourism will continue to drive growth in the South Pacific in FY2013 and FY2014. However, growth will be slower than in recent years.

In Tonga, growth is projected at 0.5% in FY2013 and 0.3% in FY2014. The expected slowdown reflects the completion of public investment projects, weak business activity, and slow recovery in remittances and private sector credit.

Source: ADB. 2013. Asian Development Outlook 2013. Manila.

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