Economy expanded amid tame inflation

PAPUA New Guinea’s economy grew during the past 13 years amid a tame inflation regime, the Bank of Papua New Guinea (BPNG) said yesterday.
In a statement, BPNG said that last year, the kina fell against most major currencie.
However, farmers and exporters benefited from the currency depreciation although it put pressure on domestic prices, prompting the bank to introduce new measures in foreign exchange markets to stabilise the kina exchange rate.
Although last year’s inflation rose to 4.7%, it was below BPNG’s estimate of 5.5%. However, the bank was projecting an annual inflation rate of 6.5% this year, reflecting imported inflation and some pass-through of the kina depreciation.
Economic growth expanded at a pace slower than the national budget forecast of 5.1%.
BPNG also projected a growth of 4.4% this year, lower than the 6.2% of budget estimate.
BPNG said growth was expected with the support from export and production of LNG and government fiscal stimulus.
Meanwhile, BPNG said the LNG export was expected to begin by middle of this year, although the revenue for government would remain minimal.
The bank said extra revenue and other associated appreciation of kina might not come about just as yet.
BPNG said it was important that the Sovereign Wealth Fund (SWF) becomes operational before the revenue from LNG starts flowing because this would help in the management the project’s revenues.
Meanwhile, based on the estimated inflation rate, BPNG would maintain the current stance of monetary policy in the next six months.
BPNG would continue to assess the movement of inflation and to make sure it was at a manageable level alongside maintaining financial stability.
The objective of the monetary policy was to achieve and maintain price stability, which then paves for low inflation, with support from stable interest and exchange rates.