High prices to continue

By GYNNIE KERO
PEOPLE can expect high prices to remain and even trend higher to the end of the year, according to the Bank of Papua New Guinea (BPNG).
This is due to anticipated inflationary pressures, which are forecast to increase throughout this year due to the continued depreciation of the Kina against the US dollar.
BPNG Governor Elizabeth Genia said there had been a decline in business confidence and that was expected to persist over the coming months with the lingering effects of January’s civil unrest.
Presenting the March 2024 BPNG Monetary Statement in Port Moresby yesterday, Genia noted that the Consumer Price Index (CPI) was projected to increase to 5 per cent this year.
Admittedly, she said, it would prove to be a very difficult environment for business at the moment.
“It is anticipated that revenues for businesses will remain under pressure.
“The consumer just does not have the discretionary income that was available to them previously.
“Employment levels in the non-mineral private sector are expected to decline in the first half of 2024,” Genia told yesterday’s breakfast gathering.
She reiterated predictions for the CPI to also remain high throughout 2025 before easing in 2026.
She said growth in the Gross Domestic Product (GDP) dropped drastically from 5.2 per cent in 2022 to 1.4 per cent last year, and is expected to grow modestly to 3 per cent. But, that would depend on Porgera assuming full production this year.
In response, PNG Chamber of Commerce and Industry president Ian Tarutia said the depreciation of the Kina was certainly a concern for businesses because of its immediate inflationary effects.
He said for those paying for imported goods and services, this translated to higher import prices.
“On the flip side for our exporters, currency depreciation is advantageous as our exports earn higher prices.
“A case in point is our cocoa products which are now enjoying record high prices of almost K1,000 per tonne due to a world shortage,” Tarutia said.
He said this situation reflected the ongoing economic challenges and the impact of currency fluctuations on the country’s economy.
Genia said a recent BPNG survey noted ongoing foreign currency shortages, increased costs of transportation, structural challenges such as in law enforcement and unreliable power sources as major concerns for businesses.
“Faced with these ongoing challenges, companies are looking at cost-cutting measures while exploring cheaper alternatives, both domestically and abroad to maintain their competitiveness,” she said.
She said BPNG was forecasting a rebound in real GDP growth to around 3.0 per cent in 2024 driven by a strong performance in the mineral sector.
“This assumes full production at the Porgera mine and higher output of gold, copper and silver from the broader mining sector.”
Port Moresby Chamber of Commerce and Industry president Rio Fiocco commented: “The expectations for GDP growth for this year and next year are based on assumptions that the New Porgera project gets into production in the not-too-distant future.”
Noting recent downside risks of illegal mining and the Government’s deployment of troops to rid this activity, Fiocco said: “The actual mine needs to be restarted.
“Then, there is the issue of the power project for the mines.
“There are quite a number of issues yet to be finalised so that the New Porgera can get into full production. There is significant risk to that.”
Overall, others said, BPNG’s policy stance will be crucial in managing these inflationary pressures.