Minimal effect of virus projected

BANK of PNG (BPNG) assumes that the spread and impact of the Covid-19 will be contained this year, with minimal effect in the medium term (2021 to 2022).
Governor Loi Bakani, in the bank’s monetary policy statement released last Thursday, said the spread of the Covid-19 and its adverse impact through disruption of production and supply chains, commodity and capital markets and international trade was having a severe impact on global economic activity.
“Papua New Guinea, like the rest of the world, is also adversely affected and the containment measures by the Government are already affecting key sectors such as trade, transport, tourism and hospitality, manufacturing and construction, and adversely impacting domestic economic activity and growth,” he said.
“The Central Bank’s projections takes into account the impact of the Covid-19 on key macroeconomic indicators. “The bank assumes that the spread and impact of Covid-19 will be contained in 2020, with minimal effect in the medium term.”
Bakani further noted that real GPD (gross domestic product) growth for 2019 estimated by the Central Bank was consistent with the Government’s estimate of five per cent in the 2020 National Budget.
“The growth was mainly driven by a full year production in mining, and oil and gas sectors, following the recovery from the 2018 earthquake.” For this year, Bakani said the Central Bank’s forecast for real growth was about three per cent.
However, he said this could be a negative growth in a worse-case- scenario if the impact of the Covid-19 pandemic was not effectively contained.
“Scaling down of business operations following the lockdown in March and the imposition of a nation-wide state of emergency immediately thereafter, have seriously affected business activity in PNG,” Bakani said.
“The decline in economic activity will further deteriorate growth from its potential output, as factors of production become under utilised.
“The economic stimulus package introduced by the Government is expected to stimulate economic activity, and lessen the adverse impact.
“In the medium term, growth is projected to recover as the economy normalises.
“During this period, if large resource projects come on stream, that will further support the recovery.”