Bank sees positive growth

PAPUA New Guinea’s economic outlook remains positive, according to the World Bank.
The international financial institution in a statement said that the upcoming construction boom, to be driven by new projects in the resource sector, was expected to benefit PNG’s external accounts over the medium term.
“While revenue from merchandise exports was anticipated to stabilise, import spending on goods and services would rise gradually,” it said in the statement.
“This would be reflective of the construction phase in the resource sector and, more generally, the economic recovery.
“As a result, the current account balance would narrow and be financed by additional inflows of foreign direct investment and external borrowing for the implementation of the new resource projects.
“As observed during the previous LNG-led construction boom, the current pressure on the exchange rate may reverse and lead to an accumulation of international reserves at the central bank.
“The successful placement of a US$500 million (K1.7b) 10-year sovereign bond and the attraction of bilateral and multilateral budget-support loans has created some breathing space for both government and businesses.
“This is allowing some of the foreign currency backlog to be cleared and imports to resume in the first half of 2019, according to the bank.
The World Bank said PNG was highly abundant in natural resources and income generated by its resource sector had risen substantially over the past several years, making the whole economy vulnerable to external shocks.
“The recent external shocks that affected the economy comprised the commodity-price shock since mid-2014, a negative El Niño impact in 2014-16 and a 7.5-magnitude earthquake that hit Highlands in February 2018. This led to a temporary production shutdown in the resource sector.”