After solid growth over FY 2015 and 2017 real GDP in Tonga is estimated to have contracted in FY2018 due to the shock from Gita.
February’s cyclone was one of the most powerful to ever hit Tonga, causing severe damage to residential and non-dwelling buildings including government offices, utilities and transport infrastructure.
The damage bill, at $US150 million, is equivalent to nearly 20 per cent of the nation’s GDP. ANZ Research estimates growth fell 0.2 per cent last financial year as the positive contribution from the immediate post-cyclone rehabilitation works was more than offset by the negative contributions from agriculture, fishing and tourism.
The Tongan government has said it will start paying down its $US160 million debt, which is two years overdue, to the EXIM Bank of China from September 2018.
A $US14 million repayment is earmarked for 2018. This means the government will take a 6 per cent hit to revenue which, in turn, will put a significant dent in its ability to undertake the necessary post-cyclone reconstruction and rehabilitation work.
Unlike other Pacific Island countries which experience almost an immediate recovery from natural disasters due to a rebound in construction, Tonga’s recovery will be subdued.
Headwinds from enforced austerity will weigh on growth over the rest of this year and into 2019. The government has steadfastly refused to undertake any new borrowing that is not concessional.
Various other factors though are likely to see real GDP increase by 1.1 per cent in 2019.