Bank: 5% growth is high

 By GYNNIE KERO

THE Bank of PNG says there is no cause for alarm or panic over the 5% inflation projection for this financial year.

Responding to a newspaper report yesterday, the central bank said the low inflation would not stifle the Government’s push to market the country as an investment destination.

It added that real GDP (gross domestic product) would grow by around 5% this year, which was lower than the Treasury Department’s forecast of 6.1%.

“There’s no big difference between Treasury’s projection of 6.1% and BPNG’s 5.5%.Two figures are close. It’s still growth, we are talking real terms. Since global crisis, no country recorded growth like PNG and Australia,” the bank said.

BPNG Governor Loi Bakani said the 5% growth by any measure was still very high.

According to the bank’s monetary policy statement, PNG’s economic growth would continue this year but at a lower rate than at the peak of the PNG LNG project construction phase.

Average kina exchange rate depreciated by 8.7% against the US dollar due to higher import demand and lower export receipts.

This year’s balance of payments was projected to be in deficit by K585 million reflecting higher imports and net service and income payments.

Foreign export reserves were estimated to be around US$3,000 (K6,904.5) million, sufficient for 5.9 months of total and 12.1 months of non-mineral import covers.

Broad money supply was expected to increase by 11.9%, driven mainly by an increase in net domestic assets of the banking system, reflecting increase in net credit to government.

Bakani said the Government had financed its deficit from the domestic banking system.

He stressed that the Sovereign Wealth Fund (SWF) should become operational before PNG LNG project began production next year.

“This would assist in managing LNG reserves and minimise Dutch Disease effects,” he said.