Economy likely to improve in next 2 years

 THE global drop in commodity prices is likely to improve economy in the next two years, according to ANZ.

South Asia, ASEAN and Pacific chief economist Glenn Maguire said as China, a driver in global economy, the slowdown in its economy was a bit severe than people expected.

“The economies that are suffering the most are commodity exporting economies, such as Australia, Papua New Guinea, Brazil, Indonesia and Asia,” Maguire told a breakfast event in Port Moresby yesterday. 

“This is really a commodity central slowdown that we are seeing at the global economy at this stage.

“What we can see, PNG and Chinese growth rate are very highly correlated. It’s not a surprise. 

“The Chinese growth rate has been commodity intensive, commodity exporter. 

“Within China, its investment, industrial production, manufacturing which is slowing and that’s 50 per cent of Chinese GDP. 

“That’s the big drag on the commodity prices.” 

He said several things had happened in the global economy.

“First is the very sharp drop in the commodity prices which occurred since late 2014,” he said.  

“Oil has dropped below US$100  (K288.18) per barrel round to about US$45 (K129.68) at the moment. 

“The LNG prices are following after.”

Maguire said at this stage there is no feasibility of when commodity prices could stabilise. 

He said: “But we think there would be between 10-15 per cent lower into first half of 2016.

“We think that the Chinese economy is going to be rebalanced in early 2017 and probably growing at around five per cent at that stage.

“And that’s how we expect commodity cycle and Papua New Guinea economic cycle to stabilise as well in which 2016 and 2017 looks to be transition years.”