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Country Report Tonga

  • ID: 2138734
  • July 2015
  • Region: Tonga
  • 17 Pages
  • The Economist Intelligence Unit

On July 16th the National Reserve Bank of Tonga (NRBT, the central bank) released inflation data showing that consumer prices were down by 0.6% year on year in May.

A 0.1% month-on-month decline in Tonga's consumer prices reflected a 0.5% month-on-month fall in imported prices, which more than cancelled out a 0.4% month-on-month increase in domestic prices. The fall in imported prices was particularly pronounced for food items, as the Tongan pa'anga appreciated against the New Zealand dollar. The recovery in global oil prices, by contrast, underpinned month-on-month increases in prices for fuel, power and transportation, helping to offset some of the fall in food prices.

In year-on-year terms, however, oil prices continue to compress the index, producing a 3.2% decline in imported prices, while domestic prices rose by 3.2% year on year as a result of higher prices for local fruit and vegetables. Imported prices have a 57.8% weighting in the index, making the fall in imported prices of greater significance than the increase in local prices. Nevertheless, substantial local inflationary pressure is indicated by the core inflation rate of 5.3% year on year in May: the core rate excludes energy and imported foods, both categories of prices have fallen on a year-on-year basis.

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Country Report Tonga

Currency appreciation raises threat of deflation
Impact on the forecast

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Note: Product cover images may vary from those shown


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