Remittances still vital for Tonga
An economist says remittances continue to form a pillar of the Tongan economy, despite their decline following the global financial crisis.
An economist says remittances continue to form a pillar of the Tongan economy despite their decline following the global financial crisis.
Government spending is the key driver of growth in Tonga while further opportunites exist in agriculture and tourism.
Ben Robinson-Drawbridge spoke with the Asian Development Banks' Christopher Edmonds.
CHRISTOPHER EDMONDS: "In general, what we find with Tonga is growth is largely driven by public expenditure because the public sector does remain rather dominant in the economy relative to a relatively small private sector. Tourism is one that has potential and we are seeing that it is a small but increasingly important sector for the country. Other non-public drivers of growth are the remittances in the country which tend to be very important. In other words, Tongans going overseas and sending money back home. As well as agriculture, so the country has a history of real successes in certain niche agricultural markets but often those markets are transient so the success can fade as easily as it pops up. In terms of tourism investments, a lot of the opportunities are just emerging because of broader regional trends towards increasing tourism with some evidence of improved air linkages and reduced flight costs. To some extent that might be related to lower oil prices but Tonga can benefit from growth in tourism to other countries, in particular to Fiji. So if Fiji improves its air connections, that connecting flight that will bring visitors from Fiji to Tonga is no doubt benefiting tourism industry in Tonga and of course there is the rising cruise industry in Tonga.
BEN ROBINSON-DRAWBRIDGE: "You mentioned the remittances that expat Tongans pay back to their families in Tonga, but isn't the fact that these able-bodied and employable Tongans are leaving their country to seek work elsewhere, is that affecting growth back home?"
CE: "So the common issue of what is often termed the brain-drain probably is a real phenomena, but measuring it at all precisely is very difficult. But undoubtedly in the face of limited public sector employment opportunities, understandably a lot of well educated Tongans, and it is a pretty well educated population, do find opportunities abroad. What is positive about that is even after Tongans do go abroad they tend to maintain good contacts with their families back home and send back the remittances particularly after disasters. So after Cyclone Ian there was a real up-tick in remittances. That's an important safety net for the economy. But I guess it's a real challenge to create opportunities when private sector investment opportunities are relatively limited, you will tend to have a lot of the more skilled workers go abroad. But with remittances that's not all together a bad thing and often we find when workers go abroad either seasonally or permanent or for some period of their work lives, often they'll come back home and bring a lot of capital for investment as well as a lot of accumulated skills that can benefit the economy. But in addition to the permanent migrants Tonga also benefits from, and the remittances benefit from, participation in some of the seasonal agricultural worker programmes in particular the New Zealand programme and to a lesser extent the Australia programme."
BRD: "So in terms of Tonga's medium to long term growth prospects, is it looking healthy?"
CE: "Healthy, but not overly encouraging. We are seeing certain measures that are leading to improved growth potential, particularly in the area of improving Tonga's connectivity to the global economy. So ADB has been working actively with the government to try to make some of the strategic investments in the infrastructure such as installing an undersea cable, improving access to energy through renewable energy projects, helping with the urban development in Nuku'alofa as well as a key concern right now for Tonga and most of the other Pacific countries is just maintaining current standards of living in the face of rising disasters and climate challenges. Last year, was particularly good growth by recent standards at 3.4 percent GDP growth. This year we are forecasting 2.8 percent growth. By next year some of the investments being made to host the Pacific Games could also contribute to growth, but between tourism and agriculture I think there are some opportunities for Tonga in coming years."
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