The Tongan economy: recent performance and future challenges

Abstract

Along with many other Pacific island countries, the Kingdom of Tonga faces many problems of development, including those associated with a narrow resource base, geographic isolation and fragmentation, and vulnerability to external shocks. Yet, by comparison with many of its developing island neighbours, Tonga has achieved considerable success in fulfilling some of its development objectives and aspirations. Over the past decade, Tonga has achieved a measure of economic growth sufficient to permit a modest rise in the level of real GDP per capita, currently estimated at around US$1,700, and one of the highest in the South Pacific. But severe problems continue in the ability of the government to achieve fiscal responsibility?high debt levels, deterioration in the balance of payments and reserves and unemployment continue to be a problem. Tonga has to pursue public sector reform as a start to establishing a competitive environment in which better growth performance can be achieved.