THE PNG economy is expected to do better than those of its Pacific neighbours because of rebounding commodity prices.
The Asian Development Bank said in a new report on Tuesday that economic growth in the Pacific would slow sharply this year, with five economies in the region expected to contract as the global economic slump continues to erode incomes from tourism and remittances.
The Asian Development Outlook 2009 Update (ADO Update) released on Tuesday, projects growth for the 14 island economies to slow to 2.8%, down from 5.2% last year.
Only the region’s mining and petroleum exporters – PNG and Timor Leste and Vanuatu, a key reformer in the area of private sector oriented growth – are expected to grow at a reasonable rate this year.
The Cook Islands, Fiji Islands, Palau, Samoa, and Tonga are all projected to contract.
Solomon Islands is now expected to record no growth because log exports are declining sharply.
ADO Update slightly downgrades an earlier ADB estimate of 3% for full-year growth in the Pacific region.
The revision to the March forecast is mainly driven by a less optimistic forecast for Timor Leste, from 12% to 8%, after it trimmed public spending to more sustainable levels since the easing of world oil prices.
The report says that, since March, PNG’s growth prospects have improved slightly to 4.5%, as export earnings benefit from a faster than anticipated recovery in key commodity prices.