Economy is estimated to have rebounded in 2019 following the contraction triggered by earthquake
The Papua New Guinea economy is estimated to have rebounded in 2019 following the contraction triggered by the large earthquake in 2018. Real GDP is projected to have grown by 5.0 percent in 2019, underpinned by recovery in energy and mineral production following the earthquake. In 2019, inflation is projected to have slowed to 3.5 percent by year-end, reflecting limited exchange rate depreciation, lower commodity prices and trading-partner inflation. Despite a large current account surplus, PNG’s non-resource sector continues to face a shortage of foreign exchange, hampering growth prospects. The current account surplus, estimated at 23 percent of GDP in 2019, is almost entirely offset by financial outflows associated with resource sector investments. In 2019 the fiscal balance deteriorated, despite higher revenues than expected, largely reflecting personnel cost over-runs. The public debt to GDP ratio has increased sharply, as the new government has recognized a large stock of payments arrears.
The challenge for the new government, which took office in June, is to resume fiscal consolidation while, at the same time, laying the foundations for raising sustainable growth and employment in the non-resource sector. Key elements of the policy framework being put in place include tightening expenditure controls, re-invigorating revenue reforms, restoring exchange rate flexibility, initiating reforms to state-owned enterprises, and addressing corruption.
To support their efforts and underscore their commitment to reform, the PNG authorities requested a 16-month IMF Staff-Monitored Program (SMP), which has been welcomed by the IMF Managing Director. The SMP provides the authorities with the opportunity to establish a track record of performance in implementation of reforms, and can also provide the basis for a Fund financially-supported program. SMPs are not accompanied by financial assistance nor endorsed by the IMF Executive Board. The reforms being undertaken by the PNG government are being supported with IMF capacity development and financial support from the Australian government.
Learn More: International Monetary Fund
|Image display type|