Rising Remittances, Slowing Exports: Tonga’s Balancing Act
If Christmas in Tonga proved anything, it’s that a good dose of family, sunshine, and homegrown hospitality can still do wonders for the economy. But as 2025 gets going, the global backdrop is anything but festive — and once again, small island nations like ours are left adjusting to the decisions of the world’s biggest players.
Let’s start with the good news.
Over the Christmas season, Tonga’s economy showed real strength. Tourists returned in full force, travel receipts jumped nearly 30%, and hotels, restaurants and taxi drivers had their busiest month in a long time. Weddings, birthdays and family reunions – some postponed for years – helped inject money into the economy, especially in Nukuʻalofa and the outer islands.
Remittances, always the quiet engine behind many family budgets, reached a seasonal high of $50.8 million in December. It’s no surprise: overseas relatives dug deep, and their support helped cover everything from school fees to Christmas shopping. These inflows continue to cushion Tonga from some of the world’s tougher economic shocks.
But here’s where the music fades.
Just as we were finding our rhythm, Donald Trump returned to the U.S. presidency and reintroduced his favourite economic instrument: tariffs. Now, they may not mean much to the average Tongan at first glance — until you realise what they do to the price of flour, rice, petrol, building materials, and just about everything else we import.
These tariffs are taxes on trade. They make goods more expensive by design. And while they’re aimed at big players like China and the EU, the fallout hits everyone — especially countries like Tonga, where nearly everything we consume comes from overseas.
Already, we’re seeing the early signs. Fuel costs are climbing. Imported food is getting pricier. And foreign reserves — the money we use to pay for all this — fell to $878 million in January. That still covers a healthy 10 months of imports, but it’s not a trend you want to see continue for too long.
Inflation ticked up to 1.2% in December, mostly because of pricier airfares and imported goods. That’s still low by global standards, but it’s heading in the wrong direction — and with Trump’s trade war picking up steam, the Reserve Bank expects further increases, albeit manageable ones.
Then there’s agriculture — the sector we always say we want to grow, but rarely give the support it needs. Exports of squash and cassava fell again in December. Bad weather and high costs played a part, but so did high local demand. Simply put, we ate what we should have sold. At the same time, our farmers face the same rising costs as everyone else, with little help to scale up or recover.
There were, however, bright spots. Tuna exports made a strong comeback, marine exports surged by more than 560%, and electricity use rose nearly 20% — a sign of livelier neighbourhoods and new housing projects coming online.
And job openings in January? Up nearly threefold. That’s a vote of confidence. Public administration led the way — especially police recruitment — but there was also activity in hospitality and finance. Lending also hit a record $589.8 million, with more families and businesses investing in homes, vehicles, and new ventures.
So, where does this leave us?
The short version: Tonga is on relatively firm ground — but surrounded by rising waters, and I’m not just talking about climate change.
Here’s what we need to do:
- Back our farmers — with real investment, not just words, so we can grow more of what we eat and export.
- Diversify trade partners — so we’re not stuck when one superpower decides to throw its economic weight around.
- Build up tourism sustainably — not just for peak seasons, but year-round through smart marketing and infrastructure.
- Support vulnerable households — especially as prices creep up.
The Reserve Bank is working to modernise how it manages inflation and interest rates, and that’s a good move. But economic policy alone won’t do it. We need coordination between government, private sector, and communities — not just to grow the economy, but to shield it from external shocks like Trump’s tariffs.
Because while the global stage may be dominated by the likes of Washington and Beijing, the real economy — Tonga’s economy — is shaped in Talamahu, the Western Union and remittance stores in town, and the choices families make each week at the checkout.
And if we want that economy to thrive, we’ll need to look after our own — smarter, stronger, and more self-reliant than ever before.
