Economy expands in Q1

By MALUM NALU
THE domestic economy continued to grow in the first quarter of 2012, mainly driven by the continuation of the construction phase of the PNG LNG project and high government expenditure, according to the Bank of PNG’s March Quarterly Economic Bulletin released last Friday.
This develops as the kina continued to appreciate against most major currencies, and the level of gross foreign exchange reserves decreased from K8.794 billion (US$4.283 billion) at the end of March 2012 to K8.58 billion (US$4.196 billion) as at June 29, 2012. 
Bank Governor Loi Bakani said continued credit to the private sector, strong private sector activity and increase in the level of employsment in the private sector were all indicative of this growth.
“Domestic demand pressures associated with the strong economic growth continue to prevail and its potential impact on inflation has been a concern,” he said.
“However, the inflation outcome was lower than expected mainly due to lower imported prices and the appreciation of the kina, especially against the US dollar.
“Annual inflation to March 2012 was 4%, compared to 6.9% in December 2011.
“The strong kina had the effect of lowering landed prices of imports, including food and fuel products, than otherwise would be.
“The bank is still mindful of the domestic demand pressures associated with the strong growth and therefore, maintained a tight stance of monetary policy by keeping its official rate, the Kina Facility Rate (KFR), at 7.75% in the March quarter of this year.”
Bakani said data from the bank’s business liaison survey (BLS) show that the total nominal value of sales in the private sector increased by 3.1% in the December quarter of last year, compared to a decline of 0.2% in the September quarter, same period.
“Excluding the mineral sector, sales declined by 1.4% in the December quarter, after increasing by 3.4% in the previous quarter,” he said.
“Sales increased in the mineral, building and construction, manufacturing and retail sectors, while there were declines in the agriculture/forestry/fisheries, wholesale, transportation and financial/business/other services sectors.
“By region, Momase and Southern regions experienced increases, while NCD, Highlands, Islands and Morobe recorded declines.
“Over the 12 months to December 2011, total sales declined by 5.4%.”
Bakani said the bank’s employment index showed that the total level of employment in the private sector increased by 1.1% in the March quarter of this year, compared to an increase of 1% in the previous quarter.
“Excluding the mineral sector, the level of employment also increased by 1.1% as the change in the mineral sector was negligible,” he said.
 “The level of employment increased in the building and construction, manufacturing, financial/business/other services, and mineral sectors, while it declined in the agriculture/forestry/fisheries, transportation, wholesale and retail sectors.
“By region, only Momase experienced a decline while all the other regions recorded increases.
Over the year to last March, the total level of employment increased by 5%, but excluding the mineral sector, the level jumped by 4.7%, Bakani said.