Inflation set to rise by 4% in 2013

By SHIRLYN BELDEN
INFLATION is expected to increase to 8% next year before falling back to 6% in 2014, Treasury Minister Don Polye said.
He told Parliament while tabling the 2013 budget that despite inflation, the economy would be stable and continue to grow. 
Polye outlined the trend of the rate of goods and services in the country and said a sustainable rate of 5% could be achieved over the medium term.
“The inflation outcome is expected to move to 8% in 2013 before falling to 6% in 2014 and be maintained at 5% over the medium term,” he said.
“There are also potential upsides including the continuing potential for further development of the mineral sector.
“With the PNG LNG project we would expect it to have a positive impact on the real growth rates.”
He said the inflation outcome was 8% in 2011 then to 4.1% this year.
The low 2012 inflation projection was reflective of the low March and June quarter inflation outcomes, the kina apreciation against other currencies, the tariff reduction programme and the impact of the tuition
fee-free education.
However these downward drivers on inflation would not be present in 2013. So inflation was expected to move back to 8% as in 2011. 
Polye outlined possible risks the country could face which include :
n    Potential disruption to the global economic recovery impacting on PNG’s trade and Government revenue;
n    Potential disruption to the progress of the PNG LNG project;
n    Potential disruption to the existing agriculture, mining and petroleum production;
n    Increasing inflation in light of capacity constraints; and
n    Loss of fiscal discipline gi­ven high expenditure pressures after the election.
He said the real economic status of the country had been strong in 2011 and 2012, growing by 11% and 9% respectively.
Polye told Parliament that in 2013, the nominal growth was predicted to be 8.9% which was a tremendous increase from 2012.
However he said growth was likely to slow down to 4% before rebounding to 5.5% in 2014 and more in 2015 when the PNG LNG project would commence.