Tonga records mixed growth in February
Suva, Fiji – May 8, 2019: 12.35pm (Nuku’alofa Times): Tonga’s economy recorded mixed growth in February, according to the latest National Reserve Bank’s Monetary Policy Decision report released this week.
The Governor of the Reserve Bank, Dr Sione Ngongo Kioa, said there were mixed growth recorded across the board.
But the good news is, Tonga’s economic performance remains positive in the medium term.
However, weather uncertainty poses a risk to the outlook.
The foreign reserves are projected to remain at a comfortable level and inflation is likely to remain below the reference rate of 5% per annually.
Dr Kioa said the agricultural export volume increased by 31.3 tonnes mainly due to more exports of root crops such as cassava and yam.
This contrasted with the decline in export proceeds for the month indicating a possible lag.
“Construction activities slowed in February reflected by lesser loans extended to the construction sector whilst individual housing loans rose slightly,” he said.
Remittances dropped again this month, due to lower private transfers for family support from abroad.
Container registrations also declined, mainly due to a decrease in private containers.
Travel receipts fell and coincided with the decline in total international air arrivals.
Meanwhile, electricity consumption increased in February coinciding with a rise in electricity consumers.
The banking system remained sound as banks continued to maintain a strong capital position supported by adequate profits.
“The banks’ total loans to deposit ratio increased to 76.0% from 74.8% in the previous month,” he said.
“The monthly rise in the ratio reflects the greater decline in deposits outweighing the increase in loans. This ratio is still below the 80% minimum loan to deposit ratio, however, the commercial banks have respectively improved on this ratio over the year due to the active lending activities utilizing the capacity available for further lending.”
The weighted average interest rate spread widened in February driven by a increases in both the weighted average lending rate and weighted average deposit rate.
Foreign reserves declined in February 2019 by $5.5 million to $473.5 million equivalent to 7.9 months of imports cover.
“This is a result of higher import payments made over the month. February 2019 annual headline inflation remained low recording a 3.2% increase,” Dr Kiao said.
The domestic and imported component of inflation contributed 3.8% and -0.5% percentage points respectively to the annual headline inflation.
The yearly increase in domestic prices is attributed to an increase in the prices of food, tobacco, restaurants and hotels while the imported component declined driven mostly by lower prices within the transport and services sectors.
Dr Kioa said that it was also good that the banking system continues to remain strong.
“Given the above developments and outlook, the current monetary policy stance is considered appropriate in the medium term,” he said.
“The Reserve Bank continues to adopt measures to encourage the utilisation of the excess liquidity in the banking system to increase lending to support domestic economic activities and strengthen the monetary policy transmission mechanism. The Reserve Bank will continue to remain vigilant and closely monitor external and domestic developments and may change its monetary policy setting to support its monetary policy objectives.”
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