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Tonga: 2024 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Tonga

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  • International Monetary Fund

Abstract

The 2024 Article IV Consultation discusses that Tonga’s economic activity has strengthened, bolstered by consistent remittance flows, continued tourism recovery, and robust construction activities. Inflationary pressures have substantially eased. After peaking at 14.1 percent in September 2022, headline inflation has since been normalizing. The near-term baseline economic outlook remains favorable appropriately supported by expansionary fiscal and monetary policy. Real gross domestic product (GDP) growth is projected to accelerate to 2.4 percent in FY2025, mostly led by continued strength in domestic demand including large public investment projects and a rebound in agricultural output as the effects of El Nino dissipate. The medium-term growth prospects remain uneven, however. Tonga’s long-term growth is projected at 1.2 percent, reflecting its exposure to increasingly frequent natural disasters, persistent loss of workers to emigration, and limited economies of scale due to geographical barriers. Structural reforms with a focus on bolstering disaster resilience, advancing digital transformation, and strengthening governance frameworks to foster a conducive business environment are essential to meet Tonga’s developments goals.

Suggested Citation

  • International Monetary Fund, 2024. "Tonga: 2024 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Tonga," IMF Staff Country Reports 2024/326, International Monetary Fund.
    • Handle: RePEc:imf:imfscr:2024/326
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