Official: LNG helps recovering economy but future not clear

PAPUA New Guinea’s economy is recovering but still faces an unclear future due to uncertainties mainly to do with the performance of the extractive sector, says World Bank senior country economist Ilyas Sarsenov.
Sarsenov said this while presenting World Bank’s PNG economic update report during the Port Moresby Chamber of Commerce and Industry business breakfast this week.
He said the concentration in the mining, oil and gas industry increased and had a big impact on the economic outlook of the country.
“All in all, you can see that the fragility and volatility of the economy comes mainly from the extractive sector,” he said.
“Almost all of the export is resourced based and the extractive sector is over 80 per cent of the total exports.
“If for some reason, the demand for LNG (liquefied natural gas) and other minerals declines and prices collapse, that will have an impact on the extractive sector that will spill to impact the economy.
“Natural disasters are another potential threat and if another one like the devastating earthquake in the Highlands hits again, that will also greatly impact the economy.
“Although the economy is recovering and the outlook remains positive, there are still certain fragilities that we (World Bank) have identified due to rising economic uncertainties.
“These uncertainties pose a potential risk to PNG’s economic outlook and they comprise of domestic factors due to the micro-economic, domestic and political policies.
“There are also external factors such as the recent escalation of the trade tension between super powers such as the United States and China.”
Sarsenov added that trade tensions had caused a loss of confidence in the global business community and investors.