Revenue from commodities low

 THE Bank of PNG reported this week that revenue from the commodity sector for the March quarter of this year remained depressed compared with the corresponding period last year

While the International Monetary Fund’s forecast of stable high commodity prices this year may have positive implication for government revenue, Central Bank Governor Loi Bakani expressed concern that so far this year, there has been a lower aggregate government revenue because of lower international commodity prices of PNG’s major exports.

Bakani also stated that with Newcrest Mining Ltd writing down the value of its stock by US$1.3 billion, it would affect government revenue.

Bakani said in the Quarterly Economic Bulletin for March that global economic growth remained weak as Europe was embroiled with deeper-than-expected recession and muted growth in China, Brazil and India. 

He stated further that the World Bank in its June 2013 Global Economic Prospect, revised downwards its global growth forecast to 2.2% this year from 2.4% it made earlier last January. 

The advanced economies are projected to grow by 1.2%, while emerging markets and developing economies are expected to grow by 5.1% this year, less than 5.5% it estimated last January.

“The austerity measures, including budget controls on spending in European countries have aggravated challenges to economic growth, while outlooks for US and Japan were raised as a result of aggressive stimulus measures,” Bakani said. 

“In the US there has been a robust private sector recovery, which has not been extinguished by fiscal tightening, while in Japan a dramatic relaxation of macroeconomic policy has sparked an uptick in activity, at least for the short term. 

“Global inflation eased further over recent months and inflationary pressures are expected to remain subdued, in line with the weakness in global demand.”

The IMF forecasts commodity prices to remain up this year from the historical lows of 2011 as a result of supply constraints and a pick-up in global demand. 

The crude oil prices, however, continue to be volatile. 

“The international price of crude oil increased to US$96 (K211.45) per barrel in June as a result of modest economic growth and increased in oil consumption by some developed economies. 

“However, there are concerns that crude oil production by the Organisation of the Petroleum Exporting Countries (OPEC) is increasing and outstripping demand which could lead to a fall in crude oil prices,” Bakani said.