Economy
From The Report: Papua New Guinea 2016
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The economy of Papua New Guinea is decelerating, with the GDP growth rate expected to fall by half in 2016 to 4.3% and by nearly half again to 2.4% in 2017. A combination of the end of the construction phase of the PNG Liquefied Natural Gas (LNG) project and an unexpected drop in energy prices has resulted in a significant decline in business activity and state revenues. The PNG economy is in for a rough few years as it adjusts to the drop in LNG prices and awaits the start of the next major project. How¬ever, barring any further dramatic declines in energy prices, growth will remain positive and the government will be able to bring its spending closer in line with revenues.

This chapter contains interviews with Peter Lanslow, Managing Director, Steamships Trading; and James Lau, Managing Director, Rimbunan Hijau (PNG) group; and a viewpoint from Joseph Ernest Zveglich Jr, Director, Macroeconomic Research Division, Economic Research and Regional Cooperation Department, Asia Development Bank

Articles from this Chapter

Overview

Bottoming out: Tough economic headwinds are creating major challenges
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The economy of Papua New Guinea is decelerating, with the GDP growth rate expected to fall by half in 2016 to 4.3% and by nearly half again to 2.4% in 2017. A combination of the end of the construction phase of the PNG Liquefied Natural Gas (LNG) project and an unexpected drop in energy prices has resulted in a significant decline in business activity and a dramatic decrease in government revenues. The country was further hit by a drought, which affected agricultural production, as well as…

Interview

Underlying opportunities: OBG talks to Peter Langslow, Managing Director, Steamships Trading Company
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Interview:Peter Langslow To what extent has the economic downturn affected Papua New Guinea’s large corporations? PETER LANGSLOW: An economic slowdown was widely expected after the completion of a project as massive as the ExxonMobil-led PNG Liquefied Natural Gas (LNG), the value of which was more than one year’s GDP during the 2009-12 period. In reaction, the focus of many corporations has shifted somewhat more internally, to ensure that their house is in order through logistical restructuring…

Analysis

Thinking big: A new state strategy should see more support for SMEs
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The government of Papua New Guinea has rolled out a new plan to support small and medium-sized enterprises (SMEs) by improving access to finance and training. Unveiled in February, the SME Policy and Master Plan 2016-30 sets out objectives to expand the economy and create employment outside of the main population and trade hubs. The package, slated to receive PGK200m ($68.3m) worth of funding per annum, aims to create 2m jobs over the next 14 years. To achieve this, the number of SMEs is…

Analysis

The kina problem: A shortage of dollars has exacerbated underlying issues
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The country is facing a severe shortage of US dollars, and this has had a direct and significant impact on the economy. Importers are unable to get the funds they need, while insurance companies have faced a loss of reinsurance coverage due to the lack of dollars. Some critics assert that the currency problems are the direct result of a June 2014 decision by the central bank, Bank of Papua New Guinea (BPNG), that has resulted in a sudden strengthening of the kina, according to Mark Baker,…

Interview

Planting prosperity: OBG talks to James Lau, Managing Director, Rimbunan Hijau (PNG) Group
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Interview:James Lau Which sectors continue to propel Papua New Guinea’s economy forward despite the overall slowdown in the region? JAMES LAU: Timber exports remained strong in 2014. The retail sector also performed well in 2014 but experienced a subsequent slowdown in 2015 due to half a year of falling commodity prices. For some companies oriented towards the Chinese market, there have been challenges this year as the country is rethinking the way it does business and is currently implementing…

Viewpoint

The next step: Joseph Ernest Zveglich Jr, Director, Macroeconomic Research Division, Economic Research and Regional Cooperation Department, Asian Development Bank
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Viewpoint:Joseph Ernest Zveglich Jr Growth in developing Asia has begun to ease slightly as prospects moderate in China and a delayed recovery in industrial economies causes a continued slowdown of growth. China has continued to shift to a new normal that is less dependent on exports and investment, which partly explains the slowdown we have observed in the region. China’s growth is moderating to 6.5% for 2016 and 6.3% for 2017. Due to protracted global capital market volatility, the US…

Analysis

Debt dealing: The burden of arrears has spurred significant debate
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In recent years, Papua New Guinea has sought to complete two key international transactions, and neither has gone as planned. The $300m facility from the World Bank’s International Finance Corporation (IFC) to provide dollar liquidity is still being discussed, while a $1bn-plus international bond has been at least twice delayed, in 2013 and again in 2015. The international bond deal is the subject of considerable doubt and criticism. It is hoped that the sale will allow the country to refinance…

Analysis

On the rise: Rich natural resources and a diversified economic mix are making Morobe a region to watch
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Located on the Gulf of Huon, due north of Port Moresby, Morobe province is widely regarded as Papua New Guinea’s industrial heartland. The region is the gateway to the highlands and islands as well, providing the main transport link between the most populous provinces of the country. The Highlands Highway ends here, making the region’s capital, Lae, the centre for a wide variety of economic activities including industry, agriculture, fisheries and mining. Lae is also the country’s main…

Overview

Obstacles ahead: The health services sector struggles to meet the needs of a growing population
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A diverse population and rugged terrain present unique challenges to providing effective health services in Papua New Guinea, especially in rural areas. Growing at an estimated annual rate of 3.1%, PNG’s population is a youthful one, with 38% younger than 15 years and only 5% over 60. The fertility rate of 3.8 live births per woman contrasts with an infant mortality rate of 47.6 deaths per 1000 live births. Those born in 2012 could expect to live 62 years, compared to 76 in the region and…