Big resource projects help economy stay positive

PAPUA New Guinea’s medium-term economic outlook is relatively optimistic, underpinned by further large-scale resource projects, says the World Bank.
Country economist Ilyas Sarsenov said yesterday following the release of the World Banks’ East Asia and Pacific Economic Update report “real GDP growth is forecast to rebound to about 5 per cent in 2019, primarily driven by a return to full annual production in the extractive sector”.
“Non-extractive sector activity is expected to continue expanding, with better investor confidence supported by improved access to foreign exchange.”
He said growth was estimated to hover around 4 per cent per year, until planned investments in new gas and mining projects kick in and improve PNG’s growth potential.
“Future large-scale investment in the re-source sector appears likely, with plans to double LNG production and develop new gold, copper, and silver reserves.
“With increased foreign exchange inflows into the economy, the current pressure on the exchange rate may reverse, adversely affecting the competitiveness of the non-resource economy.”
He said the risks and challenges includes the downside risks to macroeconomic outcomes stemming from external and domestic sources.
“The main external risks include a softening of commodity prices, which would dampen exports and GDP growth and increase pressure on the exchange rate and another natural disaster.
“Natural disasters, which are frequent in PNG, can devastate the local economy, disrupt the extraction and processing of natural resources, and create considerable fiscal pressures.
“Domestic risks include a failure to deliver macroeconomic stability via fiscal and monetary policy implementation and any civil unrest or disturbances, which could adversely affect production in the extractive sector, with potential negative spillovers to the rest of the economy.”