Barker: Economy hard hit

The National Business

By DALE LUMA
THE local economy is being severely impacted by the fall of key commodities and international share prices including measures by the Government as a result of Covid-19, says Institute of National Affairs executive director Paul Barker.
Barker said the supply chain of products to markets is currently disrupted.
He attributed the impact on the economy to:

  • The fall of key commodity and certain international share prices, notably in energy sector;
  • Measures to safeguard health, employment and ultimately the economy;
  • Associated costs of public borrowing, both to make up the shortfall in revenue; and,
  • The cost of the State assuming normal market functions.

“This means that it really is impacting PNG more severely this time,” Barker said.
“It’s not so much the impact of the lower stock market prices, although that’s clearly impacting some companies, that in some cases have had to go to the market to secure further capital for their operations and plans.
“It’s the lower commodity prices, disruption to supply and markets, especially for local tourism and related airline operations.
“This is combined with further undermining of access to forex (foreign exchange), and the big impact upon public finance, including cost of capital and debt servicing, notably in an appreciated US dollar.”
Barker said PNG was part of the global economy and noted that much of its population was still heavily dependent upon subsistence or semi-subsistence agriculture. “It still has one of the highest portions of population living on their own customary land in rural areas.
“PNG is less dominated by a few industries, than some neighbours, which are heavily dependent upon tourism, or other countries heavily dependent on oil.
“PNG is also fortunate to have its oil and gas industries somewhat balanced by its important gold industry, with gold prices already firm and actually appreciating during this period of global market disruption.”