The fall in the commodity prices and its impact on government revenue have increased business concerns in the health of PNG economy.
However, BSP’s Economic and Market Insight stated that PNG’s GDP is expected to normalised after posting strong growth (8%) over the last decade.
The report stated that the economic growth is expected to be around 4.3%, the ‘new normal’ in 2016 driven by a rebound in the mining and non-mining sectors.
There were some positive developments with OK Tedi Mine (OTML) resuming operations on March 1, after a seven-month stoppage.
According to OTML CEO, Peter Graham, the full production was expected towards the end of the month after commissioning of replacement of the part of a mill.
Meanwhile, there is a mixed view on the market and the economy, with BSP noting a general view of ‘cautious optimism’ among businesses.
General industry observations indicated that;
- The manufacturing and banking industry to some degree continued to be impacted by the shortage of foreign currency and the depreciation of the Kina exchange rate. BSP notes that the planned IFC facility (subject to agreement from ANZ (PNG) and Westpac (PNG)) may provide temporary relief, with Kina expected to depreciate further;
- The mining and petroleum sector continued their cautious approach with commodity prices expected to remain ‘low for long’. According to reports, mining exploration expenditure fell by K37m to K323m from 2014. PNG’s strategic location and low costs attribute may encourage investments in the sector;
- The investment and superannuation industry expects low growth, with employment, yields and property prices moderating. BSP expects single digit growth this year unlike double digit growth in the previous years; and
- Major retail and merchandise businesses are confident of continued growth supported by growing middle class. It is critical that they businesses manage their cost prudently.
The non-mineral sectors have the potential to support a more inclusive, balanced and sustainable growth.
It is also welcoming to see the implementation of the Small Medium Enterprise (SME) initiatives; however more is needed on the agriculture and tourism industry.
The Government and the private corporates should look at investing into these potential sectors.