Economist: Difficult year ahead

By PETER ESILA
AN economist says 2021 will be another challenging year with the Covid-19 and its economic effects still prevalent around the world and still impacting Papua New Guinea.
PNG Institute of National Affairs director Paul Barker said 2021 would be another difficult year with challenges for the country leading up to the 2022 National Elections with the temptation for frivolous public expenditure, which PNG could not afford.
“Demand for goods and commodity prices have increased, and the rollout of several vaccines provides grounds for optimism over constraining the coronavirus during the year, and particularly safeguarding the most vulnerable,” he said when giving an economic outlook for the year.
Barker said the pandemic and the Government’s restrictions severely impacted revenue, while interventions and the stimulus package, from the Supplementary Budget 2020, raised the forecast deficit for 2020 to K6.6 billion, despite major cuts applied to projects and public sector operations.
“The Government secured highly concessional funding under the Covid-19 global response from the International Monitory Fund (IMF) and other international sources, with K4.6 billion secured from external borrowing (US$400 million (K1.4bil) from Australia, US$364mil (K1.2bil) from IMF and US$500mil (K1.7bil) from ADB sources) and K2bil envisaged from domestic borrowing,” he said.
“These may permit some return to a new normal, including restoration of economic activities and jobs, including in PNG.
“Addressing global challenges and tensions will be a major issue, most notably climate change and destruction of the major sinks, such as forests and marine habitats, other environmental threats, as well as growing geo-political and trade tensions, including in the Pacific.
“For Papua New Guinea, a major focus must be on kick-starting the economy and the long static or declining job market, by addressing major business and investment constraints and boosting domestic and foreign investor confidence.
“But, also encouraging greater local participation and diversity of activities using local capital and skills.”