Economic growth in Tonga is expected to remain moderate as reconstruction activity following the Hunga Tonga–Hunga Ha’apai eruption and tsunami gradually decreases, but ongoing projects should continue to support the economy, according to a new Asian Development Bank (ADB) report.

The Asian Development Outlook (ADO) April 2026, forecasts Tonga’s growth to ease from 2.5% in 2025 to 2.3% in FY2026 and FY2027 as reconstruction spending following the 2022 Hunga Tonga–Hunga Haʻapai eruption and tsunami gradually decreased.

The forecast is based on an early stabilization scenario for the escalating conflict in the Middle East. However, the report notes that prolonged conflict could further affect the country’s economic growth through heightened price pressures, shipping disruptions, and financial volatility.

Ongoing projects including the Fangaʻuta Lagoon Bridge and the Fuaʻamotu Airport upgrade should continue to support construction in the near term, although the economy remains highly vulnerable to external shocks given its heavy reliance on remittances, fuel, and other imports.

“While Tonga’s economy continues to benefit from reconstruction activity and remittances, maintaining fiscal discipline and building resilience to external shocks remain important,” said the Regional Director of the Asian Development Bank’s Pacific Subregional Office, Azusa Sato.

"Improved access to finance and continued investment in infrastructure and resilience will be key to supporting inclusive and sustainable growth.”

Economic growth picked up to 2.5% in FY2025, from 1.8% in FY2024, supported by major public construction projects and strong agricultural output, with favorable weather boosting root crop and vegetable exports. Household demand was reinforced by robust credit growth and remittance inflows, with private credit expanding by 13.4% and remittances, about 30% of GDP, rising by 3.7%, supporting consumption and investment.

Inflation eased significantly in FY2025, falling to 2.9% from 8.0% in FY2024, supported by higher domestic food production. The rebasing of the consumer price index has increased the weight of non-tradable services, making inflation more sensitive to domestic conditions.

Inflation is projected to rise to 3.8% in FY2026 on higher global oil prices linked to the Middle East conflict before stabilizing at 2.7% in FY2027.

Private sector development

Meanwhile, the report pointed out that access to finance remains a key constraint on private sector development in Tonga.

Micro, small, and mediumsized enterprises face conservative lending practices, limited use of movable collateral, and low uptake of digital financial services, with constraints disproportionately affecting women-owned and informal businesses.

Strengthening credit infrastructure, expanding digital financial services, improving financial literacy, and supporting innovative lending mechanisms will be critical to unlocking private sector potential and broadening economic participation.

ADB is a leading multilateral development bank supporting inclusive, resilient, and sustainable growth across Asia and the Pacific. Founded in 1966, ADB is owned by 69 members—50 from the region.