The Tongan economy was well on its way to recovery from the effects of the riots and the oversized rise in public sector salaries of 2005 when it was hit by three new shocks: an inflation surge in 2007-08 due to price rises for imported food and fuels; the bursting of a bank credit 'bubble'; and the global financial crisis. Nevertheless, GDP growth has remained positive, as the subsistence sector is sheltered, and foreign financial assistance has supported construction activity and permitted an expansionary stance of fiscal policy. The macroeconomic picture is one of stability, with inflation back to low levels and the budget and the balance of payments showing overall surpluses. The economy remains vulnerable, however, and Tonga still does not appear to be within reach of a sustainable development path. The government will need-with the help of donor countries-to mobilise the private sector in key areas and tackle the main obstacles to development. Regional cooperation should also be strengthened, especially through consolidation and harmonisation. Pursuing these goals while maintaining the momentum for constitutional reform will be a major challenge.