Tonga’s growth potential is below what it could be. The economy has been growing well below the regional average for the past two decades, says an IMF Staff report. Growth is expected to gradually decline “unless there is a concerted effort to remove bottlenecks hampering private sector development.”
International Monetary Fund (IMF) staff team noted that Tonga’s economy is constrained by a narrow production base, a lack of economies of scale and high vulnerability to natural disasters.The loss of skilled workers to emigration or seasonal worker programs and the social and economic limitations on the ability of women to contribute effectively to the economy, also hurt growth prospects. Remittances are a mixed blessing—while they help to reduce poverty and finance Tonga’s heavy import dependence, remittances are keeping the economy caught in a low-growth equilibrium.
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