PNG reliant on global prices

ANZ PNG chief executive officer Mark Baker says the performance of the country’s economy is influenced significantly by trends in global commodity prices.
Baker said as such, ANZ expected the current pressure to continue for the rest of the year.
Baker was commenting following questions about the national economy for the remainder of the year.
Meanwhile Institute of National Affairs executive director Paul Barker said there had been some encouraging trends over recent months, giving positive stimulus to the local economy, notably strengthening of gold prices (on the back of global financial instability) and a modest improvement in energy prices (oil and gas) during second quarter, and re-commencement of Ok Tedi production on a reduced scale from March.  He said cocoa prices remained firm, and there’s been a moderate improvement in coffee prices, coinciding with an improved year of coffee crop.
“The trade balance is firmly positive, based upon this and the constant shipments of LNG, but as a result of the severe cut in imports over recent months, but overall economic activity has been substantially reduced, partly as a result of the squeeze on foreign exchange, not only affecting imports, but also businesses dependent in part upon overseas supplies,” Barker said,
He said it would take some time to work through backlog of accumulated debts, with smaller PNG-owned firms most affected, but even larger companies suffering.
“The lower kina value has certainly contributed to higher inflation but improves local export earnings and stimulates some import substitution, albeit handicapped by capacity constraints, which are determined by various factors, including in some cases by lack of foreign exchange and overseas inputs, so getting out of the self-reinforcing downward spiral is needed for the economy to return to recovery mode,” he said.
Barker however said there was a need for a supplementary budget to the 2016 budget at some point as revenue had remained below what the Government had forecasted in the first quarter.
“Cutting expenditure to live within revenue can of course be achieved, but only at the expense of discontinuation of important public expenditure.”