Covid-19 hitting economy hard due to weak demand: Bank

PAPUA New Guinea’s economy has been hit hard by the Covid-19 due to weaker aggregate demand and less favourable terms of trade, according to the World Bank.
In its East Asia and Pacific Economic Update released yesterday, the World Bank said the National Government had mobilised domestic resources and was engaging development partners and the private sector to finance additional public spending to support the affected economy and the population.
It said while the focus of authorities was currently on crisis mitigation, it also was important to prepare the economy for a more robust and resilient recovery over the medium term.
“The current account surplus is expected to decrease from 22.5 per cent of GDP (gross domestic product) in 2019 to about 16 per cent in 2020,” the bank said.
“Gold prices are at near-record highs, fuel import costs are falling, and Papua New Guinea is not highly dependent on foreign tourist income or remittances from abroad.
“Australia, a significant trading partner, has also successfully contained the virus so far, providing hope that regional economic disruption will be lower than in Europe or the Americas. The fiscal deficit will increase from 4.9 per cent of GDP in 2019 to 8.1 per cent estimated for 2020.
“A revenue shortfall due to the Covid-19 is estimated to contribute 1.2 percentage points to the deficit, while a limited adjustment to the expenditure side will add an extra 1.9 percentage points.
“This additional financing need is expected to be covered by the Central Bank (via a quantitative easing programme and a temporary advance facility) and external concessional financing from multilateral and bilateral partners.
“The authorities reacted swiftly by approving a package of emergency health and economic relief measures of about 2.2 per cent of GDP.
“However, its implementation has been slow.”