PNG economy to rebound: Report

The National Business

LOWER returns from the extraction and agriculture sectors and a global fall in commodity prices combined to slow down PNG’s economic growth last year, according to a report from Oxford Business Group.
However, it said prospects for a modest rebound this year were firming up. It said in early November, the Government amended its year-end GDP (gross domestic product)  growth projections to 2 per cent, significantly lower than the 4.3 per cent forecast under the 2016 budget, partly due to a weaker performance from the mining sector.
Growth in the non-mining GDP was also revised downwards to 2.5 per cent from the 3.2 per cent projected at the start of the year.
While growth slowed, inflation edged up to 6.9 per cent last year, higher than the budget estimate of 5.7 per cent. Price rises were driven by increased food costs and the depreciation of the kina, which fell 5.1 per cent against the greenback and 9.6 per cent against the Australian dollar through to the end of quarter three, resulting in higher import charges.
To ease budgetary pressures, it said the authorities floated plans in June to raise $1billionn on the international bond market. But due to a lack of investor interest this did not go ahead.
It was hoped that the debt issuance would help bridge the 2016 deficit – forecast at 4.6 per cent of GDP by the Treasury – and inject liquidity into the economy, which suffered from shortages of foreign currency during the year, restricting both trade and imports, with knock-on effects for both manufacturers and retailers.
In its 2017 budget released in November, the report said the Government again indicated it could seek to tap the international bond market for funds, though neither the timing nor value was discussed.
“Drought and frost conditions brought on by the El Niño weather pattern had a severe impact on agriculture in the first half of 2016, sharply reducing output and affecting the livelihoods of some 2.2million people, according to data released by the UN development programme in early July.”