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SHORT FORM COUNTRY REPORT PNG

11 September 2013.

Economic growth

Growth now appears to have settled at around 5.5% in 2013 down from the previous much higher GDP growth figure in 2012.

There is an expected pick up for 2014 and 2015 resulting from production at a new LNG plant coming into full capacity

Risks

In the near-to-medium term growth should be balanced however over the longer term downside risks may come from uncertain external demand, including global market conditions for LNG and commodity prices.

Inflation

Projected to rise to around 5.75% in 2013 as measured by the CPI. This will be a reflection of the pass through from a weaker Kina and demand pressures from government spending

External position

This remains strong as the floating exchange rate should continue to provide a useful buffer to any such shocks

Government spending

This will focus on more funds for law enforcement, the legal system, infrastructure, health and education.   The Government has committed to managing debt so that it stays within a target of 30% of GDP over the medium term. Some concerns exist over spending in that it should be carefully managed until development projects are effectively implemented.

Monetary Policy

This needs to adjust to a post-construction boom environment and anchor inflation at a lower rate than has been the case during the boom. Vigilance is required for possible price corrections in some segments of the property market and there may be financial sector risks from a slowdown in domestic activity

Conclusion

There is a need for a strong effort by the authorities to improve the inclusiveness of growth and at the same time diversify the economy. This needs a sustained effort to reduce impediments to DOING BUSINESS IN PAPUA NEW GUINEA which includes law enforcement costs and poor infrastructure servicing requirements.

There is also an ongoing need to focus on agriculture and small to medium sized enterprises to generate growth and jobs for the main population group

A new report on PNG will be available in November 2013

John Brooks MEcST

Trade Economist

The Auspacific Institute