Press Release: Tonga’s Price Stability Outlook Vulnerable to Import Price Shocks

The ongoing Middle East conflict remains a material external risk to Tonga’s domestic price outlook and broader economic conditions. Three months since the escalation of the conflict, uncertainty remains elevated, particularly around key global energy and shipping routes that affect downstream supply of fuel to Tonga through regional hubs including Singapore and Fiji. While global oil prices have shown some volatility, the risks of prolonged disruption beyond May 2026 continue to place upward pressure on import prices for fuel, shipping costs, and supply chains.

The latest annual headline inflation rose to 5.5% in April 2026, exceeding NRBT’s reference rate for the first time in 16 months, since January 2025. The increase was driven mainly by imported items contributing about 4.5 percentage points to headline inflation. Transportation services contributed the most with around 2 percentage points and imported food with 1.5 percentage points. Domestic food services (restaurants) added 1 percentage points with Kava prices rounding up the top 4 contributors.

Core inflation remained elevated at 9.5%, broadly unchanged from the previous month and higher than 8.7% in April 2025. This indicates that, while external price pressures remain important, underlying domestic price pressures also continue to warrant close monitoring.

Governor Tatafu Moeaki stated that “Overall inflation outlook remains subject to upside risks from global fuel and import price shocks to food imports, freight costs and expects the headline inflation to remain above the 5% reference rate in the near term with possibility of reaching double figures in this calendar year. Second-round inflation risks are heightened with Tonga’s import-dependent and price taker economy. Local fuel prices were revised upwards in May together with a 35.8% hike in the electricity tariff for the next three months.”