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Movement in capital:, people movement:, initiatives / ftas.

  • Tonga opens renewable grid to deliver clean, affordable energy to Niuatoputapu[, Tonga] Asian Development Bank 26 Jul 2023
  • New project launched to empower youth not engaged in education, employment or training in Tonga Secretariat of the Pacific Community 2 Jun 2023
  • ADB, Australia, Green Climate Finance (GCF), Tonga open renewable based mini-grid to deliver clean and affordable electricity to Vava’u[, Tonga] Asian Development Bank 14 Mar 2023

Studies and Research

  • Climate Change in the Pacific: Scientific Assessment and New Research Volume 2, Country Reports - Tonga O. Fa’anunu and M. Lakai (contributors) Pacific Climate Change Science 1 Nov 2011
  • Agriculture for Growth: Learning from Experience in the Pacific - Summary results of five country studies in Fiji, Samoa, Solomon Islands, Tonga and Vanuatu Food and Agriculture Organization of the United Nations (FAO) 1 Jan 2010
  • Pacific Adaptation to Climate Change: Kingdom of Tonga SPREP 9 Jun 2009

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Tonga | pacific tourism sector snapshot.

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This PSDI tourism sector snapshot for Tonga provides an overview of the tourism sector before the COVID-19 pandemic and identifies new and existing challenges and opportunities for the tourism industry. It includes an assessment of visitor arrivals, transportation networks, local accommodation, tourism industry employment, economic impact, governance and planning, destination marketing, environmental sustainability, and infrastructure.

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Tonga factsheet

Discover the total economic contribution that the Travel & Tourism (T&T) sector brings to this economy and the world in this data-rich, two-page factsheet.

Discover the total economic contribution that the Travel & Tourism sector (T&T) brings to this region and the world in this data-rich, two-page factsheet

Discover the direct economic contribution that the Travel & Tourism (T&T) sector brings to this city in this data-rich, two-page factsheet

Factsheet details

This factsheet highlights the importance of T&T to this economy across many metrics, and features details such as:

  • Contribution of the sector to overall GDP and employment
  • Comparisons between 2019 and 2022
  • Forecasts for 2023 and 2033
  • International and domestic visitor spending
  • Proportion of leisure vs business spending
  • Top 5 inbound and outbound markets

This factsheet highlights the importance of T&T to this region across many metrics, and features details such as:

  • Contribution of the sector to overall GDP and employment in the region and globally

This factsheet highlights the importance of T&T to this city across many metrics, and features details such as:

  • Contribution of the sector to overall GDP and employment in the city
  • Comparisons between 2019, 2020 and 2021, plus 2022 forecast
  • Proportion of the T&T at city level towards overall T&T contribution at a country level
  • Top 5 inbound source markets

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Rebuilding Tonga tourism after the pandemic

Luke Marston 17 Nov 2022

PACER Plus countries look to reinvigorate key industries to support their economic recovery with international borders reopening worldwide. The impact of the pandemic on tourism industry has been severe, where it is estimated some 80 per cent of tourism-sector jobs have been lost across the region. The tourism sector remains a key pillar of many Pacific economies and presents an important opportunity to stabilise service sectors and kick-start their diverse value chains again.

For Tonga, pre-pandemic tourism contributed to over 11 per cent of GDP, a critical factor recognised by Lorraine Kauhenga, Deputy CEO at Tonga Ministry of Trade and Economic Development (MTED) when developing the program of support for international trade under the PACER Plus Agreement. Key tourism markets for Tonga are Australia and New Zealand, where over 70 per cent of tourist arrivals originate from, and thus MTED prioritised support to the Tonga Tourism Authority (TTA) as measure.

With the support of PACER Plus Implementation Unit, the TTA commenced a fast-tracked program of training and re-training tourism staff. Priority themes identified through a training needs analysis in late 2021 included customer service, communications, and COVID-19 protocols as key areas for development.

On 29 June 2022, the first of a series of the customer service and communications training took place at Tungi Colonade in Nuku’alofa. Some 24 participants developed skills in greeting customers, responding to complaints, and range of other activities over the two-day training.

“The Ministry would like to thank the TTA for leading this much needed training in preparing our tourism industry for the reopening of the borders, learning new things as we adapt to the new norm of living with COVID-19 and its uncertainty, but also to serve as a refresher to gain new energy as we once again greet the world,” said Ms Kauhenga.

Training on health and hygiene standards and COVID-19 soon followed on 11 July 2022 in Nuku’alofa, with more trainings to be rolled out across the countries in priority locations including Vava’u, Ha’apai and ‘Eua.

“Whilst the pandemic has had many devastating impacts, a positive development has been the increased use of technology in the way we work. This was seen as a key opportunity for expanding the reach of training activities,” said Ms Simata Palu, Planning and Development Manager at TTA.

With support from the PACER Plus Implementation Unit, TTA was able to live stream their event.

“This is an important step in making our training more inclusive and accessible, as well as sustainable. Whilst we still need to develop our systems and processes to best capture this new way of delivering training, we are learning new skills and will strive to make this better as we progress,” said Ms Palu.

Supporting economic recovery and promoting trade in the region is key objective of the PACER Plus Agreement. As we look to the future, many countries will consider prioritising opportunities that tourism presents in creating jobs, expanding the services sector, and international investment – all key elements of PACER Plus, and the role of the Implementation Unit in supporting.

“We also appreciate the financial assistance provided through the PACER Plus Implementation Unit in making this training possible. We look forward to more successful trainings such as these and regaining the world's confidence in our tourism industry,” said Ms Kauhenga.

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Encyclopedia of Tourism pp 1–3 Cite as

Tonga, tourism

  • Jenny Cave 3  
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The Tongan archipelago of 172 islands (36 inhabited) is located northwest of New Zealand in the South Pacific Ocean (Figure 1 ). Tonga was settled over 3,000 years ago and called the “Friendly Islands” by Captain Cook in 1771, but its many forts and oral tradition attest to a turbulent history. The Kingdom of Tonga (unified in 1845) is a constitutional monarchy.

Map of Tonga (Map drawn by Max Oulton, cartographer, University of Waikato)

  • Tourism Destination
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  • Tourism Expenditure

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McElroy, J.L., and P.E. Hamma 2010 SITEs Revisited: Socioeconomic and Demographic Contours of Small Island Tourist Economies. Asia Pacific Viewpoint 51 : 36-46.

Article   Google Scholar  

Orams, M. 2013 Economic Activity Derived from Whale-Based Tourism in Vava'u, Tonga. Coastal Management 41:481-500.

Small, C., and D. Dixon 2004 Tonga: Migration and the Homeland. Migration Information Source, 1 February www.migrationpolicy.org/article/tonga-migration-and-homeland (2 November 2014).

Statistics Department Tonga 2012 Migration Time-series 11/2012 www.spc.int/prism/tonga (12 February 2014).

Tonga Visitors Bureau 2013 Kingdom of Tonga: The True South Pacific www.thekingdomoftonga.com (12 February 2014).

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Department of Tourism Management, University of Waikato, Knighton Rd, 3240, Hamilton, New Zealand

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Jafar Jafari

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Honggen Xiao

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Cave, J. (2014). Tonga, tourism. In: Jafari, J., Xiao, H. (eds) Encyclopedia of Tourism. Springer, Cham. https://doi.org/10.1007/978-3-319-01669-6_687-2

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Tonga Tourism Statistics

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You are here, severe labour shortages, damaged tourism facilities, drag tonga's recovery.

Monday, November 6, 2023 - 22:55.   Updated on Friday, November 17, 2023 - 16:15.

tonga tourism economy

Tonga’s economy is performing strongly but faces growing headwinds, the International Monetary Fund ( IMF ) stated in its country report for Tonga published on 3 November.

The post- HTHH recovery in FY2023 (July 2022‒June 2023) has been driven by strong domestic demand and a pickup in tourist arrivals since the border reopening in August 2022, it said. 

“However, supply-side constraints resulting from severe labour shortages [due to worker migration] and damaged tourism facilities are acting as substantial drags on the recovery and have intensified inflation pressures.”

In concluding its Article IV consultation with Tonga and endorsing the staff appraisal, the Executive Board of the IMF in Washington, DC , stated that the Tongan economy is underpinned by resilient remittance inflows and major reconstruction activities following the Hunga-Tonga Hunga-Haʻapai ( HTHH ) volcanic eruption in January 2022.

“The authorities’ bold policy support measures, together with aid from the international community and the IMF ’s emergency financing under the Rapid Credit Facility, were instrumental in mitigating the socioeconomic fallouts,” the IMF  said.

Significant uncertainties

“While the economic recovery is expected to continue in the short term, the outlook is subject to significant uncertainties. Growth in FY2024 is projected at 2.5 percent, led by public investment. 

“Although tourism-related services are recovering, tourism receipts as a share of GDP are anticipated to remain below pre-pandemic levels until FY2026 due to slow reconstruction of damaged facilities. 

“The recovery in agricultural production is expected to proceed slowly, reflecting labour shortages and bad weather due to El Niño. 

“Tonga’s long-term growth is projected at 1.2 percent, given its exposure to increasingly frequent natural disasters, persistent loss of workers to emigration, and limited economies of scale due to geographical barriers.”

Executive Board Assessment 

Under Article IV of the IMF 's Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country's economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board. 

The IMF reported that despite sizable remittances, continued grants, and a rebound in tourist arrivals, Tonga's current account deficit is estimated to have widened in FY2023 due to higher import needs for reconstruction-related capital goods. 

“Nevertheless, foreign exchange reserves continued to increase, supported by official capital transfers and the Rapid Credit Facility disbursement in July 2022. 

“The current expansionary fiscal stance is appropriate, given the need to expedite reconstruction and protect the most vulnerable. Under the authorities’ FY2024 budget, the primary balance for FY2024 is expected to revert to a deficit, reflecting lower external grants and continued implementation of public reconstruction projects.

“Considering the authorities’ limited administrative capacity and prevailing inflation pressures, the execution of budget should focus on priority areas such as reconstruction and social protection, while non-urgent spending should be postponed,” the IMF  recommended.

High risk of debt distress

They said that Tonga is assessed as being at high risk of debt distress without new grant commitments, and sizeable external debt repayments in the coming years would further strain its public finances.

“Gradual fiscal adjustments over the medium term involving additional tax revenue mobilization and reductions in current expenditures, are crucial to achieve Tonga’s development objectives in a fiscally sustainable manner, together with securing grants in line with historical levels. Enhancing spending efficiency and fiscal transparency can help achieve the necessary fiscal adjustments and mitigate the growth impact.

“Further monetary policy tightening is warranted to contain inflation pressures. Despite the increase in the statutory reserve deposit ratio and other measures taken in early 2023, banking system liquidity remains abundant, limiting the impacts on bank lending and aggregate demand. Given the significant inflation pressures, monetary policy needs to be tightened further, including by increasing the policy rate, combined with additional liquidity absorption measures. Resuming issuance of National Reserve Bank of Tonga ( NRBT ) notes and strengthening NRBT ’s operational independence can help foster financial market development and improve the monetary policy framework. The current currency basket-weight system has served Tonga well.

Increase in non-performing loans

More proactive measures are required to tackle banks’ asset quality risks. Given the recent increase in non-performing loans ( NPL s), the authorities should consider requiring banks to adopt a more conservative provisioning approach and to submit concrete plans for NPL reduction. The NRBT should also enhance its risk-based supervision and broaden its regulatory and supervisory remit to cover non-bank financial institutions. 

The IMF also recommended:

  • Comprehensive structural reforms aimed at enhancing climate resilience and nurturing the private sector are essential to boost Tonga’s low growth potential. 
  • Stricter enforcement of Building Codes and facilitating relocation of properties to safer grounds would enhance Tonga’s disaster-resilience. 
  • Reducing gender inequality and augmented public investment in training and education will help tackle labor shortages. 
  • A strong government-wide drive to accelerate the adoption of digital technologies, notably in public administration, as well as continued efforts to cut red tape and to strengthen the AML / CFT framework, are also important in this regard. 
  • Ample fiscal resources should be allocated to ensure production of timely and more reliable macroeconomic statistics. 

Tonga: 2023 Article IV Consultation-Press Release; and Staff Report

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$30 million in support for tonga’s most vulnerable.

WASHINGTON D.C., December 16, 2020 -- The World Bank's Board of Executive Directors has approved a US$30 million operation to support Tonga's recovery following the impacts of COVID-19 and Cyclone Harold.

Tonga is currently responding to two major shocks to its economy, with COVID-19 having severely impacted Tonga's tourism, retail and construction sectors -- affecting at least 30 percent of the economy. In addition, the country was also hit hard by April's Category 4 Tropical Cyclone Harold, which affected approximately 27 percent of the population, and is estimated to have caused damages and losses of more than 12 percent of the country's total Gross Domestic Product (GDP).

In response, the Tonga: Supporting Recovery After Dual Shocks Development Policy Operation will support Tongan businesses, workers and vulnerable households to recover from these dual shocks, with the aim of building a more resilient, sustainable and inclusive economic recovery for Tonga. The funding supports social welfare payments from the Tongan Government to many of the country's most vulnerable, including the elderly, people living with a disability, families facing challenges meeting school fee payments, and workers and business owners affected by the dual shocks.

"While Tonga has made some progress in minimizing the combined impacts of Cyclone Harold and the global impacts of COVID-19, both have affected us significantly," said the Hon. Tevita Lavemaau, Tongan Minister of Finance. "There is still much to be done. With this support from the World Bank, we will be able to help our most vulnerable citizens, communities and businesses to recover better, and bolster our resilience to future climate-related and economic shocks."

This funding of US$30 million supports an economic and social stimulus package that includes social welfare payments to more than 4,400 elderly Tongans and more than 1,000 people living with disabilities, and financial support for secondary school students to stay in school.

The operation also supports businesses to retain their workers through wage subsidies for more than 5,300 workers from over 670 businesses that have been hit by the dual crises. This is the first scheme of its kind to be implemented in Tonga and one of only a few such instruments in the Pacific. The Government has also provided financial support to more than 2,100 formal and informal businesses, including for example, urgent assistance for businesses in the tourism industry.

Other initiatives include the expansion of the Government's flagship loan schemes for Micro, Small and Medium Enterprises (MSMEs), new legislation that will provide greater clarity for foreign investors regarding contract dispute resolution, and the establishment of a new Housing Sector Resilience Office (HSRO) to strengthen the resilience of housing across the Kingdom.

"The Government of Tonga has taken a number of bold, innovative efforts to address many of the challenges caused by the dual shocks of COVID-19 and Cyclone Harold," said Michel Kerf, World Bank Country Director for Papua New Guinea and the Pacific Islands. "In 2020, we are marking 35 years of partnership with the Kingdom of Tonga, and the scale and scope of this support reflects both the strength of our partnership, and our shared commitment to supporting a sustainable social and economic recovery that aims to ensure no Tongan is left behind."

This operation is funded through the International Development Association (IDA), the World Bank's fund for the world's poorest countries, including resources from a US$25 million allocation from the IDA Crisis Response Window .

The World Bank works in partnership with 12 countries across the Pacific, supporting 83 projects totaling US$1.75 billion in commitments in sectors including agriculture, aviation and transport, climate resilience and adaptation, economic policy, education and employment, energy, fisheries, health, macroeconomic management, rural development, telecommunications and tourism.

World Bank Group Response to COVID-19

The World Bank Group, one of the largest sources of funding and knowledge for developing countries, is taking broad, fast action to help developing countries strengthen their pandemic response. It is supporting public health interventions, working to ensure the flow of critical supplies and equipment, and helping the private sector continue to operate and sustain jobs.

The World Bank Group is making available up to $160 billion over a 15-month period ending June 2021 to help more than 100 countries protect the poor and vulnerable, support businesses, and bolster economic recovery. This includes $50 billion of new IDA resources through grants and highly concessional loans and $12 billion for developing countries to finance the purchase and distribution of COVID-19 vaccines.

Vika Waradi

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Related Content

Tonga: 2022 article iv consultation-press release; staff report; and statement by the executive director for tonga, us$53 million boost for education and transport in tonga, tonga youth take lead in disaster risk management, adb provides $200,000 grant to tonga for cyclone harold relief.

Pacific Economic Growth Slowing After Post-Pandemic Rebound

Pacific Economic Update March 2024

Investment in education critical to address significant learning gaps, foster sustainable growth, report finds.

SUVA, March 6, 2024 — Growth in Pacific island countries is estimated to have slowed in 2023 and is forecast to continue to decelerate in 2024 and 2025 as the temporary boost from the COVID-19 pandemic recovery fades and fiscal policies begin to tighten, the World Bank said in its semi-annual economic outlook for 11 Pacific island countries.

Investments in key drivers of long-term growth—education, in particular—will be crucial to sustaining economic momentum, the World Bank’s new report, Pacific Economic Update – Back on Track? The Imperative to Invest in Education says.

Growth in 2023 among the Pacific island countries surveyed eased to an estimated 5.5% following a historically high expansion of 9.1% during 2022, the first year of recovery from the pandemic. Economic activity was buoyed by tourism, household consumption and remittances, and was further supported by accommodative fiscal policies. The report covers Federated States of Micronesia (FSM), Fiji, Kiribati, Nauru, Palau, Marshall Islands, Samoa, Solomon Islands, Tonga, Tuvalu, and Vanuatu.

Collectively, these countries are projected to expand 3.5% in 2024 and 3.3% in 2025, which would still be the fastest rates since 2017, excluding the pandemic bounce-back expansions in 2022 and 2023.

Moderating growth across Pacific island countries in 2023 reflects the slowdown in still-resilient Fiji, which accounts for more than half of the group’s output. Fiji is estimated to have decelerated to 8% in 2023 after surging 20% in 2022. After having returned to pre-pandemic GDP levels in 2023, supported by the resurgence of tourism and robust consumption, Fiji’s growth is expected to normalize toward its long-term rate.

In the rest of the region, a slight acceleration in growth is anticipated. However, the output is not expected to exceed its pre-pandemic GDP level until 2025. Solomon Islands, the second-largest economy in the group, is estimated to have reversed a 4.1% contraction in 2022 with 1.9% growth last year, driven by hosting the Pacific Games and substantial investments in energy and transport. It is forecast to pick up to 2.8% in 2024.

“Despite a commendable rebound in growth after lifting pandemic restrictions, growth among the PIC-11 countries will face challenges in achieving the full recovery of output growth to its pre-pandemic path,” said World Bank Senior Economist in the Pacific, Ekaterine Vashakmadze. “Fundamental reforms to invigorate investment growth can help improve medium-term growth prospects.”

Tourism and remittances-led countries, such as Samoa, Tonga, and Palau have experienced a notable rebound in growth after three consecutive years of contraction. This revival is attributed to a robust recovery in visitors, particularly from Australia and New Zealand. Countries [with income led] by sovereign revenue—Kiribati, Nauru, Tuvalu, FSM and Marshall Islands—experienced a relatively mild contraction in 2020 and are now experiencing positive, albeit moderate growth.

The report underscores the significance of pending Compact Agreements between the United States and FSM, Marshall Islands, and Palau to achieve projected growth rates. If approved, these agreements could create substantial fiscal space, presenting an opportunity for more public investment initiatives.

Short term risks to the outlook have been more balanced as commodity prices and inflation have eased .

 “However, risks remain as adverse shifts in the global economy, trade, and tourism may pose challenges to the economic prospects and poverty outcomes. Those could stem from an uncertain global environment, most notably, heightened geopolitical tensions,” added World Bank Senior Economist Reshika Singh .

A special focus chapter on developing human capital in the Pacific emphasizes that investment in education – through quality and well-resourced, evidence-based teacher training, and ensuring that children are taught in their first language – can deliver immense economic dividends for individuals, families, and society. In Tonga, for example, teacher training investments were found to increase students’ future incomes by more than $12 for every dollar spent.

However, in most Pacific Island countries, more than half of 10-year-olds do not meet international benchmarks in reading. In some countries (Kiribati, Tonga, and Tuvalu) two-thirds of 10-year-olds fall short of these standards. A notable exception is Palau, where 90% of 10-year-olds meet international benchmarks in reading.

“If Pacific children struggle to read proficiently by the end of primary school, they will face daunting hurdles to succeed in their further education,” said World Bank Lead Economist for Human Development in the Pacific, Lars M. Sondergaard . “While the situation is improving, progress is slow. The most important asset that Pacific island countries have is not their natural or physical resources, or their geographical location; it is their people.”

Pacific Economic Update – Back on Track? The Imperative to Invest in Education is available online.

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Pacific Economic Update: Back on Track? The Imperative of Investing in Education

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Welcome to the Ministry of Tourism Tonga Website

Located to the west of the International Dateline (South-East of Fiji and South of Samoa), Tonga is the first Pacific nation to greet the new day.

Tonga has dramatic & active volcanic landscapes, spectacular tropical rainforest, low-lying coral atolls, pristine coral reefs, magnificent sandy beaches and a unique and beautiful array of flora and fauna.

There is so much to see, do and experience when you visit Islands such as Tongatapu, Vava’u, Ha’apai and ‘Eua. Those seeking adventure can go scuba diving, snorkeling, whale watching, fishing, surfing, hiking, camping, kayaking, horse riding, sailing and much more. In addition to all of the activities, travelers can simply enjoy the gentle pace of our Island lifestyle, observe our authentic and timeless culture, participate in our daily rituals and experience the generosity and hospitality of our people.

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ISLANDS OF TONGA

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The Kingdom of Tonga is known as the  Friendly Islands. With 176 islands to explore, you will be spoiled for choice in the Kingdom of Tonga. Only 40 islands are inhabited, so it is easy to imagine yourself on one of the deserted islands and become friends with the local sea life. Tonga’s motto is “Ko e ‘Otua mo Tonga ko hoku tofi’a”, “God and Tonga are my Inheritance”.

Come to Tonga for a truly relaxing holiday and experience the true South Pacific.

tonga tourism economy

Singapore to Tonga

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Honolulu to Tonga

Tonga has an interesting and colourful history of kings, colonisation, tribes and encounters from the other side of the world. To commemorate some of these key points in Tonga’s history, plaques and memorials can be found in historically significant places across the islands of Tongatapu and Ha’apai, while strange megaliths and ancient tombs also stand as historical places of interest. Check out some of the historical sites in Tonga that you can visit

OUR CULTURE

Beautiful beaches, turquoise waters and swaying coconut palms can be found in many places in the world, but only in Tonga can you experience the unique Tongan culture. While visiting the South Pacific’s only kingdom, it would almost be a crime to miss out on experiencing the fascinating Tongan culture.

HERITAGE SITES

Forget about everything for a while and enjoy the diversity of the Kingdom of Tonga’s 176 islands with even more beaches. Private, deserted beaches or beaches full of life – in the Kingdom of Tonga you choose what you want. There are family friendly beaches with activities for the whole family to enjoy. Or perhaps you are looking to escape just that and want to watch the sun sink into the ocean with sand between your toes and nothing but happy thoughts.

The Tongan archipelago consists of 176 islands, roughly the same number of marine species divers encounter in their first hour exploring the Kingdom’s coral reefs, caves and crystal clear waters. With sea turtles, manta rays, tuna, marlin and wahoo combining with even bigger creatures like whale sharks, Tonga is a destination with underwater thrills on a truly grand scale.

TONGAN CUISINE

Expect to be well-fed in Tonga! Food means everything to Tongans, who put on some of the grandest feasts in the South Pacific. Even the portion sizes are staggering, giving you another level of reward after tasting some of the fresh produce of the islands and surrounding oceans. But whether you’re looking to try authentic Tongan cuisine, a new spin on international favourites, or simply grab a coffee as part of your morning routine, there are plenty of excellent cafes and restaurants in Tonga.

Tonga is full of ever-changing events each year, from tourism festivals to village beautification competitions to beauty pageants. However, there are a few events, conferences, festivals and public holidays that happen in Tonga year after year. See if your trip to Tonga coincides with any of these exciting events in Tonga!

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Asia-Pacific countries are trying to beat inflation and cost-of-living pressures — but are they winning the fight?

A food market full of people in bright coloured clothes, and vendors selling pineapples, bananas and other crops, in Vanuatu.

Dinner habits have changed for Fononga Pulu at his home in Tonga's capital.

Where he used to eat 'ume — his favourite fish — he now buys chicken.

Yam was once a staple, but now rice is the better option for his stretched food budget.

"We used to buy fish from the fish market. We love eating seafood. But now fish is really expensive," he says.

"I stopped eating fish … that's how we survive."

A photo of Tonga and Nuku'alofa resident Fononga Pulu, standing in front of the sea giving a thumbs up.

Sela Latailakepa, another resident of Nuku'alofa, says rising prices are forcing her family to cut back on some foods, such as mutton flaps and salted beef.

They also bought their own chickens after egg prices increased.

"We're having to find alternatives for store-bought food, or we just need to save up a bit more so we can afford the stuff that we really need to buy from the shops," she says.

"You have to be really, really smart to spend the little pennies that you're able to gather from your weekly salary."

Tongan woman Sela Latailakepa sits down in the garden of her home in Nuku'alofa.

Their struggles are common in Tonga, where inflation reached 8 per cent last year, and more than 10 per cent in 2022.

The country's not alone in the region's cost-of-living crisis, a new World Bank report shows.

Other Pacific Island countries — especially those dependent on tourism and earnings sent home by overseas workers — are still grappling with high inflation.

In Samoa and Vanuatu, it was about 8 per cent in 2023.

"Elevated inflation poses a significant threat to the livelihoods of Pacific Islanders," the report says.

A 'sticky' problem

Pacific Island nations import food and fuel, exposing them to global inflation, World Bank senior economist Ekaterine Vashakmadze says.

"High inflation in major partners is very important because they are importing that high inflation right from elsewhere," Ms Vashakmadze says.

But there are unique causes for high inflation levels in each country, too.

Samoa is dealing with high commodity prices, increased freight costs, and a depreciating currency.

Tonga's volcanic and tsunami disaster in 2022 hit agricultural crop production, a problem worsened by higher global commodity prices.

Vanuatu is recovering from three cyclones in 2023 that hit food supplies.

A food market full of people in bright coloured clothes, and vendors selling pineapples, bananas and other crops, in Vanuatu.

Another problem is labour shortages.

"You have now high demand on labour. You have tourists flowing in, you have demand for services, and then you have a lot of construction in the countries going on," Ms Vashakmadze explains.

"On the other hand, you have labour moving countries for seasonal work, and so that creates this imbalance, which puts pressure on labour markets."

This will keep pressure on core inflation — which excludes costs of imported food and energy.

"Core inflation is still being sticky," Ms Vashakmadze says.

How are Pacific nations responding?

Overall, inflation is falling across the region.

Pacific Island nations have been trying to blunt the impact of inflation through tax exemptions and spending measures.

Tuvalu used cash payouts to help people with cost-of-living pressures.

Fiji and Solomon Islands waived import duties and gave tax exemptions for some staple foods.

And last year, Vanuatu's government reduced import duties on fuel, rice, and chicken wings.

In Fiji, the government also subsidised fuel, reduced its value-added tax on essential goods and controlled food prices.

Fiji's measures have gained mixed reviews from the World Bank.

In its Pacific economic update this year, it found they gave short-term relief but could have been better targeted at those in need and on tight budgets.

But Ms Vashakmadze says Fiji's price controls worked well in blunting inflation.

"And the good news is that they are unwinding them already," she says.

How have Asian economies fared?

Inflation is also declining across economies in Asia.

And throughout most of the region, it didn't reach the heights seen elsewhere.

A recent IMF economic update found inflation on average fell from 3.8 per cent in 2022 to 2.6 per cent in 2023.

By comparison, annual inflation in Australia reached 7.8 per cent in late 2022.  

Inflation has declined especially fast for emerging Asian economies.

There are a few outliers — Laos and Myanmar have had huge inflation, stemming from high depreciation of their currencies.

And an abundance of crops and weaker demand have contributed to low inflation in China.

But elsewhere in the region, the IMF predicts central banks are on course to reach their inflation targets in 2024.

Senior economist at the ASEAN +3 Macroeconomic Research Office (AMRO) Catharine Kho says governments in the region have used price controls to shield their countries from inflation.

"This is quite widely practised throughout the region, either on essential goods or on energy prices, or on whatever's most important for that particular economy," she says.

A woman pushes a shopping cart next to shelves of palm oil.

Indonesia capped retail prices for packaged and bulk cooking oil, increased compulsory domestic sales of palm oil and raised export levies for the product.

In Malaysia, authorities subsidised bottled cooking oil, capped retail prices for chicken and eggs, and abolished permits for some food imports.

The Philippines cut tariffs on some food imports, while Thailand increased import quotas and cut tariffs on corn.

Singapore and Indonesia have given cash to people struggling with higher prices.

Relief needs to be targeted

Governments also subsidised energy (Indonesia, Malaysia and Japan) and cut duties and taxes on fuels (Korea, the Philippines, Thailand and Vietnam).

Ms Kho says subsidies were targeted at lower-quality products, such as lower-grade meats and fuel, to relieve financial pressure on more vulnerable households.

"That's also how you can ensure that fiscal resources are used more strategically," she says.

When it comes to support for people struggling with cost-of-living pressure, both Ms Kho and Ms Vashakmadze agree on one feature: It should be targeted at people who really need it.

Ms Vashakmadze says policies such as transferring cash to vulnerable people are more effective than blanket subsidies, which can be costly.

"If you have an identified group of people, communities, households, vulnerable groups, providing them with cash subsidies, or other types of transfers … those are policies, which we highly support," she says.

What can Asia-Pacific countries do now?

As inflation declines, countries across Asia are trying to rebuild their finances and will look at removing cost-of-living support.

"Our advice to them is to withdraw this very carefully and … very strategically," Ms Kho says.

"So, for example, it can't be an overnight withdrawal, it needs to be communicated early and it needs to be communicated well."

She says easing inflation levels can change course. 

"Coming to this last mile, it's a bit difficult to declare the war over yet. There are still a lot of risks for inflation this year," she says.

Ms Vashakmadze says if there are no unexpected shocks, inflation will continue to drop in Pacific Island countries this year.

"It doesn't mean that prices will not still bite the consumers because we have seen years of high inflation," she says.

"But at least we will see that the governments will be in a better position to calmly handle the situation and support those who are really still in need."

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IMAGES

  1. Tonga International tourism revenue

    tonga tourism economy

  2. Economy

    tonga tourism economy

  3. Cost of Living in Tonga: prices in 2 cities compared [2023]

    tonga tourism economy

  4. Tonga GDP Per Capita PPP

    tonga tourism economy

  5. Tourism in Tonga, 10 Reasons to Visit Tonga

    tonga tourism economy

  6. Moving to Tonga guide

    tonga tourism economy

COMMENTS

  1. PDF Pacific Tourism Sector Snapshot

    The Tonga Tourism Sector Roadmap 2018-2023 is Tonga's current tourism sector strategy. The roadmap does not differ ... It outlines the vision that "tourism will be the key driver of Tonga's sustainable future economic growth, enhancing our unique culture and heritage, supporting environmental protection and increasing wealth for all ...

  2. Tonga

    Tonga - Agriculture, Fishing, Tourism: Agriculture is the mainstay of the Tongan economy. Squash, coconuts, bananas, and vanilla beans constitute the main cash crops, and other important crops include yams, taro, cassava, corn (maize), watermelons, pineapples, breadfruit, limes, and tomatoes. All land is essentially owned by the Tongan monarchy, but large estates have been divided among the ...

  3. Tourism and economic growth in the Pacific region: evidence from five

    We present a country-specific analysis on the effect of tourism on the economic growth of five small Pacific Island Countries (PICs) - Fiji, Samoa, Solomon Islands, Tonga and Vanuatu. The results show tourism development is growth-enhancing for all five countries. Foreign direct investment (FDI) is growth-enhancing for Fiji, Samoa, Solomon ...

  4. PDF Tonga Tourism Crises Impacts Assessment Report

    thus deeply affected Tonga's people, tourism sector, and wider economy. Our country, however, has also had to face additional disruption and destruction from two natural disasters during this time. As the Minister responsible for Tourism, I am honoured to share with you the Tonga Tourism Crises Impacts Assessment Report.

  5. Tonga Country/Economy Profile

    The economy contracted by 3.0% in FY2021 (ended 30 June 2021) as all inbound travel was suspended, upending the tourism industry. Delayed border re-openings, competition for returning tourists, and disaster-related losses from the offshore Hunga Tonga-Hunga Ha'apai volcanic eruption are likely to slow any recovery in tourism. In FY2022, GDP is forecast to slide further by 1.2%, but GDP

  6. Economy of Tonga

    The Tongan economy's base is agriculture, which contributes 30% to GDP. Squash, coconuts, bananas, and vanilla beans are the main crops, and agricultural exports make up two-thirds of total exports. The country must import a high proportion of its food, mainly from New Zealand. The industrial sector accounts for only 10% of GDP.

  7. Tonga Tourism Statistics 2004-2024

    U.S. Economic Charts. GDP by Country GDP Per Capita by Country Manufacturing by Country Debt to GDP Ratio by Country. ... Tonga tourism statistics for 2020 was 47,700,000.76, a 16.46% decline from 2019. Tonga tourism statistics for 2019 was 57,099,998.47, a 18.71% increase from 2018.

  8. Tonga

    This PSDI tourism sector snapshot for Tonga provides an overview of the tourism sector before the COVID-19 pandemic and identifies new and existing challenges and opportunities for the tourism industry. It includes an assessment of visitor arrivals, transportation networks, local accommodation, tourism industry employment, economic impact ...

  9. Tonga

    Tonga. Released on May 09, 2023. Tonga factsheet. Discover the total economic contribution that the Travel & Tourism (T&T) sector brings to this economy and the world in this data-rich, two-page factsheet. Discover the total economic contribution that the Travel & Tourism sector ...

  10. PDF 2021-22 Tonga Development Program Progress Report

    Tonga's tourism industry, which comprised 25 per cent of GDP before the pandemic, was decimated by COVID and the HTHH disaster . Tonga's economy is highly exposed to global inflationary pressures due to its reliance on import s (62.3 per cent of GDP). Rising inflation is putting substantial pressure on households, business es and government ...

  11. Rebuilding Tonga tourism after the pandemic

    For Tonga, pre-pandemic tourism contributed to over 11 per cent of GDP, a critical factor recognised by Lorraine Kauhenga, Deputy CEO at Tonga Ministry of Trade and Economic Development (MTED) when developing the program of support for international trade under the PACER Plus Agreement. Key tourism markets for Tonga are Australia and New ...

  12. Tonga, tourism

    Tonga positions itself among other tourism destinations as the "True South Pacific," since its 103,000 residents blend traditional lifestyles and subsistence economy with contemporary technologies (Small and Dixon 2004).After remittances, tourism provides the second largest income, followed by foreign aid and state employment (Tonga Visitors Bureau 2013).

  13. Survey on travelers' expenses, profiles, and opinions

    The Tonga Statistics Department has embarked on a project with the World Bank to create a Tourism Satellite Account (TSA), a standard statistical framework used to measure the economic impact of tourism. This industry plays a pivotal role in Tonga's economy, with a focus on ecotourism, adventure tourism, and cultural tourism.

  14. Tonga

    TO: International Tourism: Expenditures data is updated yearly, averaging 17.300 USD mn from Dec 2001 to 2013, with 13 observations. The data reached an all-time high of 31.100 USD mn in 2013 and a record low of 3.200 USD mn in 2002. TO: International Tourism: Expenditures data remains active status in CEIC and is reported by World Bank.

  15. PDF Tonga Statistics Department

    Tonga's economy and tourism industries. • Review with the Tonga Statistics, Tonga Tourism and other department and agencies, on current data and resources available in these areas . Submit preliminary report early July 2022. (Report 1) June-August 2022: Consultancy services

  16. Severe labour shortages, damaged tourism facilities, drag Tonga's

    Tonga's economy is performing strongly but faces growing headwinds, the International Monetary Fund (IMF) stated in its country report for Tonga published on 3 November. Although tourism-related services are recovering, tourism receipts as a share of GDP are anticipated to remain below pre-pandemic levels until FY2026 due to slow reconstruction of damaged facilities.

  17. Support for post-pandemic recovery, resilience and jobs in Tonga

    The Kingdom of Tonga is now in an economic recovery phase following the onset of the COVID-19 pandemic - which has severely impacted Tonga's tourism and construction sectors - as well as the Category 4 Tropical Cyclone Harold, which caused damages and losses of more than 12 percent of Tonga's total Gross Domestic Product (GDP ...

  18. The Economic Impact of Tourism in Tonga

    Production and Consumption of Tourist Landscapes in Coastal Areas: Case Study of Tourism in Malaysia. O. G. Ling. Geography, Environmental Science. 2009. The development of both natural and built heritage for tourism has been part of national agendas particularly in Southeast Asia. Coastal resort developments have sprung up throughout the region.

  19. Humpback Whales in Tonga: An Economic Resource for Tourism

    A lengthy history of research has shown that tourism can have a positive impact on job and income generation in Tonga through both direct and indirect linkages to the community (Connelly-Kirch ...

  20. $30 Million in Support for Tonga's Most Vulnerable

    Tonga is currently responding to two major shocks to its economy, with COVID-19 having severely impacted Tonga's tourism, retail and construction sectors -- affecting at least 30 percent of the ...

  21. About Us

    The Tonga Tourism Authority is responsible for working together with Tourism Directed businesses to market Tonga as a tourist destination. Tonga Tourism creates awareness of its products and services to be experienced by tourists. It is our vision that Tourism drives Tonga's future sustainable economic growth, improving living conditions and ...

  22. Pacific Economic Growth Slowing After Post-Pandemic Rebound

    Economic activity was buoyed by tourism, household consumption and remittances, and was further supported by accommodative fiscal policies. The report covers Federated States of Micronesia (FSM), Fiji, Kiribati, Nauru, Palau, Marshall Islands, Samoa, Solomon Islands, Tonga, Tuvalu, and Vanuatu.

  23. Ministry Of Tourism Tonga

    Welcome to the Ministry of Tourism Tonga Website Located to the west of the International Dateline (South-East of Fiji and South of Samoa), Tonga is the first Pacific nation to greet the new day. Tonga has dramatic & active volcanic landscapes, spectacular tropical rainforest, low-lying coral atolls, pristine coral reefs, magnificent sandy ...

  24. Homepage

    Welcome to the official travel site of the Kingdom of Tonga. The Kingdom of Tonga is known as the Friendly Islands. With 176 islands to explore, you will be spoiled for choice in the Kingdom of Tonga. Only 40 islands are inhabited, so it is easy to imagine yourself on one of the deserted islands and become friends with the local sea life.

  25. Australia's neighbours are winning their 'war' against inflation

    Their struggles are common in Tonga, where inflation reached 8 per cent last year, and more than 10 per cent in 2022. The country's not alone in the region's cost-of-living crisis, a new World ...