PNG gets a gloomy forecast

THE country is set to face several years of economic “stagnation”, according to a statement from the International Monetary Fund.
The expected rise of debt-to-GDP (Gross Domestic Product) ratio and increased difficulty in financing deficits by the government were cited as reasons for the forecast.
This was one of several points raised in a brief by the IMF executive board late last year.
“A new government is keen to address the immediate fiscal challenges as well as longer-term structural reform, and introduced a supplementary in September with bold measures to ensure a narrowing of the fiscal deficit,” the statement said.
“Nonetheless, on unchanged fiscal and monetary policies, PNG faces several more years of economic stagnation, with a growing risk of fiscal and financial instability as the debt-to-GDP ratio continues to rise and financing of deficits becomes increasingly difficult.”
The Real GDP growth is projected to rise from 2.2 per cent last year to 2.5 per cent this year, albeit under subdued economic conditions, says the IMF report.
“In 2015 to 2016, growth of the Papua New Guinea economy slowed sharply, to under 3 per cent, in response to falls in major export commodity prices, the completion of the huge PNG LNG pipeline project, and a severe drought, and in 2017 economic activity has remained subdued.”
Fiscal consolidation over the medium-term is essential to reduce the debt-to-GDP ratio and lower the risk of debt distress, according to the IMF.
“Going forward, fiscal consolidation should involve expenditure measures, including streamlining public sector employment and payroll as well as prioritising spending on education, healthcare and infrastructure.
“The implementation of a medium-term strategy to increase revenues is also important to support higher and more inclusive growth.”