The economy is showing signs of recovery, supported by government spending and accommodative monetary policy, officials report.
The National Reserve Bank of Tonga (NRBT) said in its June 2025 economic update that fiscal expansion and improved access to finance were driving domestic activity, with credit growth rising 13.5% over the year to April.
Inflation fell to 2.3% in April, well below the 5% benchmark, though core inflation remained elevated at 8.8%, signalling continued pressure from energy and essential goods costs.
Foreign reserves increased to $871.5 million in May, equivalent to 10 months of import cover, despite a dip in remittances and growing import demand. The NRBT expects reserves to remain above the optimal threshold of 7.5 months in the short term.
“The economy is showing resilience, but we remain cautious of external shocks and domestic vulnerabilities,” the NRBT noted in its release.
Global risks include fallout from ongoing trade tensions and geopolitical instability in the Middle East. Domestically, non-performing loans rose to 14%, highlighting persistent stress in the credit sector.
The Reserve Bank stated it will continue strengthening monetary tools to manage inflation and support recovery.
