Economy at risk: Bank

THE country’s medium-term macroeconomic outcomes remain subjected to high downside risks, according to the World Bank.
Senior economist Ilyas Sarsenov told The National that although gross domestic product (GDP) growth would resume this year, the growth rate could be volatile due to external and domestic factors.
“Externally, (if the) economic growth in Australia, China, and Japan – Papua New Guinea’s main trading partners – is below expectations, demand for Papua New Guinea’s key commodity exports may be affected, placing downward pressure on the local currency and eroding external buffers,” he said.
“Commodity prices and natural disasters may continue to impact extractive sector performance, with negative implications for the rest of the economy.
“These developments would negatively impact resource revenue flows to PNG’s external and fiscal accounts.
“Domestically, this volatility is subject to an uncertain performance by the country’s major (existing and new) resource projects.
“Potential delays in the implementation of new resource projects may also impact macroeconomic outcomes, affecting the underlying assumptions of the baseline scenario.”
Sarsenov said despite falling commodity prices and an exceptionally uncertain global economic outlook, current account balance was estimated to have recorded a surplus last year.
He said, however, the size of the surplus would be significantly smaller than in 2019.
“As in previous years, the current account surplus will be offset by a large deficit on the capital and financial account,” he said. “In a pessimistic scenario, a second wave of the pandemic may lead to a more prolonged global recession with implications for Papua New Guinea’s export revenue.
“In addition, failure to resolve tensions surrounding mining projects may further depress export revenue and shake investor confidence in Papua New Guinea.”