Report: PNG economy recovering from shocks

PAPUA New Guinea’s economy has begun recovering from a series of external shocks, but global economic uncertainties are mounting, according to a report released by the World Bank on Friday.
The report, Papua New Guinea Economic Update: Recovery Amid Uncertainty, said that to increase the resilience of the economy, the government would need to continue pursuing its structural transformation agenda for more inclusive and sustainable development of the country, with agriculture as one of the priority sectors.
The report was the third in the current series of the World Bank’s economic updates, reviewing recent developments in the country’s economy and providing an in-depth examination of a selected development issue in the country.
This report has a special focus on the country’s agricultural sector and its potential as a key economic driver in the years ahead.
The new report said that signs of growth are returning in PNG, following a recovery in production in the resource sector.
GDP growth was estimated to jump from negative 0.5 per cent in 2018 to 5.6 per cent this year and was projected to hover between 3.1 and 3.5 per cent in 2020-2021, supported by proposed investments in several large resource projects.
As observed during the previous construction boom in the resource sector, the current pressure on the exchange rate may reverse in the coming years.
Meanwhile, growth in the non-resource economy remains subdued due to sluggish domestic demand, leading to lower inflation.
“PNG’s growth outlook remains positive but fragile due to rising economic uncertainties ranging from the domestic political economy to the recent escalation of trade tensions between the United States and China,” World Bank senior country economist for PNG Ilyas Sarsenov said.
“To mitigate downside risks to the outlook and better weather external shocks, it is recommended that PNG authorities adjust macroeconomic policy and focus on structural transformation of the economy, especially in agriculture as a potential economic driver for more diversified and inclusive development.”
The report included a close look at PNG’s agriculture sector as a key economic generation activity that was expected to thrive in coming years through increased private sector partnership support for small-scale farmers, particularly given that most of PNG’s population lived in rural areas currently worked in farming for cash income.
The report recommended that PNG authorities focus on improving cooperation and institutional capacity through greater agricultural public-private partnerships to support this sector to realise its vast potential for the country.
This was in line with the PNG government’s medium-term development plan III, which focused on developing physical and human capital and strengthening governance and institutions for critical areas and priority sectors, including agriculture.
“The key to unlocking the full potential in agriculture lies in how smallholders are organised and supported to transform the sector,” World Bank senior agricultural specialist Allan Oliver said.
“Today, the World Bank-funded Productive Partnership Agriculture project supports more than 67,000 coffee and cocoa farmers across 12 provinces, providing them access to markets and aligning them with latest policy and requirements.”
This unique partnership has seen an increase in net income of smallholder coffee and cocoa growers by 40 per cent.
This includes more than 24,000 women who are being supported to take greater ownership and responsibility in the production and sale of coffee and cocoa across the country.