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

Tonga’s economic activity has strengthened, bolstered by consistent remittance flows, continued tourism recovery, and robust construction activities, despite a fall in agricultural output. The potential for a stronger recovery has, however, been hindered by supply-side constraints including labor shortages. Inflationary pressures have eased, and headline inflation is falling below the 5 percent reference rate of the National Reserve Bank of Tonga (NRBT), mainly driven by the moderation of global goods and commodity prices. The elevated frequency of natural disasters, limited economies of scale, and geographical remoteness collectively temper medium-term growth. Localized risks are emerging in the banking sector.