The Tongan economy will be struggling for survival during the next financial year, 2007-08, warns Tonga's Minister of Finance, Hon. Siosiua 'Utoikamanu, saying that the government has suffered a massive hit on its revenue stream following the losses suffered by the country's businesses on November 16.

In a statement on Saturday night, March 3, the Minister blamed the riots of November 16, last year for a serious deterioration in the Tongan economy. He said that slower business activity caused by the events, "comes on top of lower remittances and tourist receipts. These will reduce all tax revenues for the budget."

"The future outlook is not good because businesses are going to take a while to return to normality. In the meantime, we will have to accept the fact that they will not be able to contribute sufficient revenues which the country desperately needs," he stated.

The new government budget for the next financial year 2007-08 is usually tabled with parliament at the end of May.

"Last year's budget process was touted as the most difficult due to our obligations to the pay settlement and redundancies but this year is likely to be worse because we have suffered a massive hit on our revenue stream from the losses suffered by the 143 businesses affected by the events of 16/11.

"This means that our revenue collection will be less giving us a lower capacity to pay for public services. This will inevitably hurt budget expenditure.

"We are forecasting, not just a slowdown, but a fall in GDP of 3-4% by June and the economy will stay at that low level for the next financial year," said the Minister.

The latest official Gross Domestic Product was $297.3 million for 2003-04.

The Minister of Finance said that the government's biggest challenge is to maintain the delivery of core public services such as health, education and law and order. "Any other non-core services will have to face significant budget cuts.

"The announcement of the budget is always an exciting time to highlight new projects and new ideas on how we can grow the economy. Sadly, however, this year will be more about surviving over the next twelve months," he said.