Economic Analysis - Growth Downgrade Following Cyclone Destruction - APR 2018

BMI View: Following the destruction caused by Tropical Cyclone Gita in February, which was reportedly the worst storm to hit Tonga in 60 years, we have downgraded our FY2017/18 (July-June) real GDP growth forecast to 2.3% (from 3.0% previously). The agriculture and tourism sectors will be negatively impacted, but projects that are aimed at rebuilding the damaged infrastructure in the country will provide some support to economic activity and lead to a rebound in FY2018/19.

The downside risk that we flagged out for Tonga came to fruition as the Pacific island-nation was hit by Cyclone Gita on February 13, and we are therefore revising down our FY2017/18 (July-June) real GDP growth forecast to 2.3% from 3.0% previously. According to various news sources, Cyclone Gita was a category four tropical storm, with peak winds of up to 230 kilometers per hour, and was the worst to hit Tonga's main island in 60 years, which we believe will hamper economic activity over the coming months. For example, at least 80% of the electricity network was severely damaged, according to Tonga Power Ltd., while the parliament house and a significant number of homes were also destroyed. Australia and New Zealand have already provided emergency humanitarian assistance and disaster relief operations to Tonga immediately after the cyclone hit the Pacific island-nation.

Agriculture And Tourism To Be Negatively Impacted

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