ADB says this year’s inflation at 6.5%

 THE country’s inflation rate is projected to rise from 4% last year to 6.5% this year, Asian Development Bank (ADB), country economist Aaron Batten  (pictured) said. 

However, Batten said the rate was then expected to drop to 5.5% next year.

He said this was still a moderate rate for Papua New Guinea.

“By PNG’s historical record, that is still quite moderate for the country.

He said the Central Bank (Bank of Papua New Guinea) usually targeted about 5%.

Batten said the projected rate was moderate because it was just marginally above the central bank’s target. 

“But there will be a need to ensure that the benefits of PNG’s growth are not undermined by inflation as it has been in the past.” 

Batten said the government’s fiscal stimulus had an impact on the country’s high inflation rate.

“PNG’s history indicates that when the kina is lower, the government undertakes fiscal stimulus.

“So when the government is running low on deficit, almost always it led to high rates of inflation. 

“So ADB’s projection for inflation for this year and next year are significantly higher than what they have been in the last two years,” Batten said.  

In 2013, inflation was 4% and 2.2% the previous year.