Skills shortage, forex shortage, security affect businesses: Survey


SKILLS shortage, foreign exchange (FX) availability, security, unreliable communications and unreliable utilities were the top five constraints for businesses in the country over the past nine years.
This was according to Westpac’s senior economist Justin Smirk in his analysis of the PNG 100 CEO Survey conducted by Business Advantage covering the years 2012 to 2021.
He noted that from 2016 to 2019, as liquidity improved, FX dropped back down the list but in 2020 it popped back to be the most significant constraint and it was only beaten in 2021 by the Covid-19 restrictions.
“Telecommunications improved from 2019 and are now seen as a much less significant constraint than they were,” he said.
Smirk said there had been similar improvements in utilities and skills but there has been little change in law and order.
He said while it was tempting to blame the impact of the Covid-19 and its restrictions on the country economically, the fact there was no real improvement in FX or security/law and order suggested that these issues were significant.
“It is also interesting to note the jump in logistics being a constraint on businesses this year compared to the improving trend seen since 2016.
“The Covid-19 restrictions have significantly disrupted transport and distribution networks and you would expect that this to improve as the Covid-19 restrictions are lifted.”
According to the March monetary policy statement, the Bank of PNG forecasted the economy to grow 2.5 per cent in 2021 following a -3.8 per cent contraction in 2020.
“The Covid-19 shock hit the economy hard but we can see that there is more going on than just Covid,” Smirk said.
“While total gross domestic product (GDP) rose 5.9 per cent in 2019, fell -3.8 per cent in 2020 and is forecast to rise 2.5 per cent in 2021, non-mineral GDP rose a more modest 2.4 per cent in 2019, fell a smaller -1.1 per cent in 2020, while the BPNG is forecasting a bounce of 2.2 per cent in 2021.
“The completion of large resource projects and the delay or cancellation of new projects had a bigger impact on overall economic growth than the Covid-19 restrictions did in 2020.
“With the Covid-19 restrictions behind most of the contraction in non-mineral economic activity in 2020, the reopening of the economy in 2021 should see a bounce.
“As such, the outlook is tied to how quickly the pandemic is brought under control.
“Businesses remain very uncertain and, without a positive external shock of a large of resources project, the PNG economy remains vulnerable to new outbreaks.”