Question

Discuss three important sources of economic growth in the Kingdom of Tonga.How do these countries deal with international and domestic shocks-what are their fall back? How can international development partners help?

Answer 1

Tonga’s economic freedom score is 58.8, making its economy the 107th freest in the 2020 Index. Its overall score has increased by 1.1 point due to a higher government integrity score. Tonga is ranked 22nd among 42 countries in the Asia–Pacific region, and its overall score is below the regional and world averages.

The economy of Tonga fell from moderately free to mostly unfree in 2019 and remains there in 2020. GDP growth has been driven by ongoing reconstruction work following Cyclone Gita and by inflows of donor assistance from Australia and New Zealand.

The total value of exports and imports of goods and services equals 94.8 percent of GDP. Many of Tonga’s products are consumed domestically, but imports—mainly from New Zealand, Singapore, the United States, Fiji, and Australia—form the bulk of the goods consumed in the country. Food and beverages account for the largest category of imports, in terms of value. Exports include mainly agricultural crops and fish, and New Zealand, Japan, Australia, and the United States are the chief destinations.

The average applied tariff rate is 5.5 percent, and nontariff barriers further impede trade flows. Foreign investment is screened by the state, and investment in some sectors is restricted. The underdeveloped legal system impedes the development of a modern financial sector. Much of the population remains outside of the formal banking sector.

Other neighboring countries are supporting them financially and intangibly. They give financial support to Tango during natural calamities and disasters. Also some countries are putting small investments in Tango to develop their infrastructure.