Economy to grow by 4pc: Bank

PAPUA New Guinea’s economy is projected to grow by four per cent in 2022, driven largely by growth in the extractives sector, a new World Bank report says.
The PNG Economic Update: Navigating a Fragile Recovery looked at key recent developments in PNG’s economy and placed these in a longer-term and global context, with the report estimating the economy returned to positive growth of one per cent in 2021 after contracting by 3.5 per cent in 2020. This year, the extractive sector is projected to be the main driver of gross domestic product (GDP) growth – an estimated four per cent – driven by the planned reopening of the Porgera gold mine.
However, the report estimated that overall medium-term growth in PNG was likely to be impacted by higher global uncertainty.
According to the report, PNG is expected to face considerable challenges from the Coronavirus (Covid-19) pandemic, despite its economic output not being as severely impacted as in many other East Asia and Pacific economies.
The new report also said while local agricultural production continued unabated through the pandemic, PNG’s overall GDP growth had lagged behind global and regional averages, with performance further constrained by falling gold and liquefied natural gas (LNG) production.
“The biggest challenge for the PNG economy this year will be navigating a fragile recovery; this is particularly challenging while uncertainty remains high,” World Bank country economist for PNG Ruslan Piontkivsky said.
“A sound fiscal consolidation strategy – one focused on mobilising domestic revenue to decrease the medium-term fiscal deficit – is vital for PNG,” he said.
“This will be important to navigate while also prioritising improvements to the delivery of public services.” The new report recommended that to safeguard fiscal sustainability, Papua New Guinea should aim to improve the credibility of the annual budget process, as well as ensure companies operating in the resource sector are contributing revenue back to PNG’s budget.
The report also emphasised that further improvements to PNG’s tax policy and tax administration would ultimately help to reduce the country’s debt burden.