Budget comment casts light on problems that need to be addressed

Pricewaterhouse Coopers partner Stephen Beach says there are problems that needs to be addressed to move forward.
He said this in his commentary to the Lae Chamber of Commerce and Industry last Thursday on the main economic features and taxation developments set out in the 2019 Budget.
Beach said in the past, the Papua New Guinea economy had been “boom and bust”, as it rode significant shifts in global commodity prices and large investments swings.
The year was a negatively impacted by the devastating earthquake which hit the Highlands in the first quarter.
“This not only caused heavy loss of life and social disruption, but also shut down many of the crucial resource projects for up to two months, with mining and gas GDP contracting by 9.4 per cent as a consequence,” Beach said.
“However, after three years of negligible growth, the non-mining sector is expected to have recorded GDP growth of 3.1 per cent this year, mainly from the agriculture, forestry and fishing, administration and support services and wholesale and retail trade sectors.”
Beach contrasted these non-mining GDP growth statistics with official employment numbers, which for the year up to June, was recording a contraction of 3.2 per cent in the non-mining sector.
“In his budget speech, the Treasurer (Charles Abel) referred to the more than K1 billion of new investment in manufacturing capacity during the past year, which has reportedly increased output capacity by up to 30 per cent,” he said.
“The Treasurer also noted advice from the manufacturing sector that they anticipate employment growth of 15 per cent this year.”
Beach said while much of this new manufacturing investment had taken place in Lae, with the exception of the fish canning sector, there had been very little evidence of employment growth in most of the manufacturing businesses.
He said growth for next year was highly dependent upon a return of consumer and investment confidence and more cash flowing into the economy.
Beach said fixing the foreign currency imbalance had been identified by Abel as one of the major impediments to investment growth and business confidence.
He said it was positive news that the successful US$500 million (K1.65bil) bond issue, together with the additional budgetary and concessional loans from Asian Development Bank, World Bank and China Exim Bank, were expected to go a long way to address this issue.
Beach said while this may restore some normalcy to trade and revenue flows, he would expect delays on dividend and capital flows to continue for some time.