Global Economy
The global economy is projected to grow at 6.0 percent in 2021 and 4.9 percent in 2022 (IMF-WEO July 2021 update). The global forecast remains the same in compared to the April 2021 WEO, though there were some offsetting revisions. The forecast for the emerging market and developing economies were being revised down for 2021, particularly for Emerging Asia. On the other hand, an upward revision in forecast for advanced economies. These revisions attribute to the development progress in terms of policy support due to the pandemic. The 0.5 percentage-point upgrade for 2022 was mainly due to the upward revision in forecast for the advanced economies, particularly the United States. This reflects the additional fiscal support and improved health measures that were implemented.
Domestic Economy
The Tongan economy continues to negatively impact by the pandemic in FY 2021. In response, Government implemented several measures to mitigate the impact, include the call being made to close the border. To date, the continuous closure of the border to international travelers, except for repatriation flights has positively contributed towards maintaining Tonga COVID-free. In contrast, all travel related activities, including the tourism industry continues to be seriously affected.
Additionally, the restriction measures worldwide have literally affected all sectors, employment, business, trade, manufacturing, and services activities. The impact has trickled down to the region and Pacific and Tonga.
The real Gross Domestic Product (GDP) growth is projected to grow by 1.2 percent in FY 2021, compared to the 0.7 percent growth in FY 2020. GDP growth, is projected to improve in FY 2022 by 2.1 percent. This reflects Government ongoing reform measures and initiatives to restore key sectors and growth in the economy.
The rounding off on the implementation of the Government Economic and Social Stimulus package of $60 million has contributed to affected businesses and individuals. The further Stimulus package of $70 million - equivalent to 5.5 percent of Tonga’s GDP, will surely help to maintain the economy.
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