BSP: No recession yet

By DALE LUMA
PAPUA New Guinea is technically not yet in economic recession, says Bank South Pacific (BSP) chief executive Robin Fleming.
“The general technical definition for a recession is that a country has experienced negative gross domestic product growth for two successive quarters,” Flemming explained to The National.
“The last publicly released economic data showed economic growth as positive and, therefore, PNG is not yet in recession.
“The International Monetary Fund (IMF) and Asia Development Bank (ADB), amongst others, have forecast that GDP (gross domestic product) will contract by one per cent in 2020 and then grow by 2.2 per cent in 2021 but, at this stage, they are only projections and estimates. As gross domestic product is a measure of goods and services produced over a period of time, GDP data provides an indication of what historical economic activity has been in a numerical fashion.
“Therefore, downturns that business, large and small are experiencing and will experience in coming months will reflect in lower GDP growth data in the June 2020 quarter, rather than a recession slowing down business.
“As business growth slows down, generally profits reduce, tax collections would also reduce and there would be fewer people in employment.
“In those types of conditions, business would preserve cash and not enter into any expansion until such time as there is some form of stimulus that provides business with the confidence to make investments and increase trade or productions of goods.”
Fleming said a stimulus may be an external event such as a LNG project or additional projects initiated by governments to generate economic activity.