Tongans working overseas are helping boost the kingdom’s economy with the money they send home.
According to the government’s budget statement “robust” economic development in the kingdom has been supported by growth in the global and regional economies.
An economic growth rate of 3.4 percent is expected in 2017/18.
The budget said growth would be supported by construction projects, recovery in the agriculture sector.
It also said the increasing amount of money sent home by Tongans working overseas would also boost the economy.
It said remittances continued to increase in line with the growing number of Tongan seasonal workers participating in Australia’s Seasonal Worker’s program (SWP) and the New Zealand’s Recognized Seasonal Employers’ Program (RSE), as well as growing links between Diaspora Tongans and the domestic economy.
Overall, the economy is anticipated to grow at an average of 2.8 percent in the medium-term. It said tourism would also help.
“The full operation of Tanoa International Dateline Hotel, opening of other hotels in Tongatapu, increase in number of cruise ships and tourists arrivals will not only spur growth in the tourism industry but the economy as a whole,” the budget statement said.
Tonga’s financial situation is stable with reasons for optimism, but there are still potential hazards and growth is expected to slow in about two years.
Inflation remains high, mainly driven by higher imported prices. Global prices of gasoline and diesel have gradually increased since early 2016 as have prices of imported food items
There has been a 13.2 percent increase in the price of imported food items such as meat, fish and poultry.
On the domestic side, the price of kava-Tonga remained the largest single contributor, with 71.4 percent increase over the past year. Prices of some food items have also risen due to seasonal factors.
Global economic factors beyond Tonga’s control and problems caused by global warming all continue to pose potential threats to the economy.
And the kingdom’s indebtedness to China continues to cast a long shadow.
While China has a major influence on the Tongan economy as a trade partner and lender, the budget statement warns that the kingdom is massively exposed to China financially.
The budget statement said that the agreement between China’s EXIM Bank and the Tongan government to defer repayment of the principal of China’s loans for five years would mean Tonga actually had to repay more money.
It is expected the government will have to borrow more money to cover the loan repayment.
Forecast borrowing for 2019/20 is $TP48.7 million, due to repayment of the China EXIM Loan of $25.4 million.
The main points
- Tongans working overseas are helping boost the kingdom’s economy with the money they send home.
- According to the government’s budget statement “robust” economic development in the kingdom has been supported by growth in the global and regional economies.
- The budget said growth would be supported by construction projects, recovery in the agriculture sector.
- But global economic factors beyond Tonga’s control and problems caused by global warming all continue to pose potential threats to the economy.
