Tonga - Poverty and Equity Assessment 2024

Investment Rating - The report does not explicitly provide an investment rating for the industry [7]. Core Insights - Tonga's economic growth has been historically weak and has faced significant challenges due to multiple shocks, including natural disasters and the COVID-19 pandemic, which have potentially reversed previous welfare gains [22][54]. - Despite these challenges, poverty and inequality in Tonga fell substantially between 2015 and 2021, with the national poverty rate declining from 27.4% to 20.6% [25][26]. - The report highlights the critical role of remittances in poverty reduction, indicating that without them, the number of poor individuals would have been 50% higher [35][38]. Summary by Sections Executive Summary - The report utilizes the 2021 Household Income and Expenditure Survey (HIES) to assess poverty and inequality in Tonga, filling critical knowledge gaps [22]. - Improvements in monetary well-being were observed, with household ownership of key assets increasing and access to basic services improving [28]. - The report identifies remittances as a significant driver of poverty reduction, with nearly 90% of households receiving them [35][38]. Introduction - Tonga is classified as an upper-middle-income nation with a GNI per capita of US$7,160, facing unique developmental challenges due to its geographical isolation [53]. - The economic growth rate has historically lagged behind other Pacific Island countries, with a series of shocks significantly hindering growth [54][56]. Poverty and Inequality Patterns - The poverty rate declined across both rural and urban regions, with urban Tongatapu having a lower poverty rate compared to 'Eua and Ongo Niua [25]. - Spatial disparities in well-being persist, with urban areas accommodating a significant portion of the impoverished population [25][28]. Human Capital and Labor Market - Labor force participation remains low, and there are significant skills mismatches in the domestic labor market, impacting employment opportunities [30]. - The average child born in Tonga is projected to be only 53% as productive as they could be under optimal conditions, highlighting the need for improved human capital [30][31]. Poverty and Social Protection - Current social assistance programs have limited coverage and impact on poverty reduction, necessitating policy changes to increase benefit levels and coverage [32][34]. - The report suggests that substantial increases in remittances have been a more significant factor in poverty reduction than social assistance programs [35]. Conclusion and Recommendations - The report emphasizes the need for developing effective social protection systems and enhancing human capital to ensure sustainable poverty reduction [47][50]. - It calls for a more in-depth investigation of the impacts of temporary labor schemes on the private sector and overall household outcomes [51].