Economic growth expected to bounce back, says ADB

By HELEN TARAWA
Papua New Guinea’s economy is vulnerable to volatile commodity prices, says the Asian Development Bank.
This is because it is resources-based, which leads to economic boom-and-bust cycles.
Asian Development Bank vice-president for East Asia Southeast Asia and the Pacific Stephen Groff made this observation yesterday.
Groff, who is currently in the country for the Apec finance ministers’ meeting that takes place today, told The National that economic growth was expected to bounce back from as low as 0.5 per cent this year to 3 per cent next year.
“In the initial forecast for this year, the economic growth was about 1.8 per cent but it was revised down to 0.5 per cent and largely because of the earthquake disrupting mining and the oil facilities,” he said.
“We do see growth bouncing back to about 3 per cent next year.
“That would be the result of increased LNG production and gold production in 2019 so we do see the economy recovering next year.”
Groff said increased oil prices could have a positive impact on the PNG economy.
He said the main challenge was that the economy was so dependent on international prices for commodities, whether in mining, oil and gas or even agriculture.
“We see very low prices for cocoa, coffee and copra,” Groff said.
“That’s had a very negative impact on agricultural sector in Papua New Guinea.
“In a short-to-medium term, gold price increases in mining can have a positive impact on the economy.
“We need to make sure that the increase revenue is invested in productive assets to help sustain the economy through the next drop in commodity prices.
“Also use increased revenue to help diversify the economy so it’s not so dependent on raw materials that are subject to volatile prices.”
Groff said ADB had a long standing relationship with PNG.
The focus has been on been on infrastructure, including the Lae Port, Highlands Highway, transport sector in rebuilding and refurbishing a number of airports.
“We are also very active in the health sector,” Groff said.
“We also advise the Government on economic issues and building strength resilience under the PNG economy.
“We help advise the country and the Government on issues around economic management and investigate economy.”