Economic activity slow

Domestic economic activity continued at a slow pace for the second quarter of 2017.

In its Quarterly Economic Bulletin for June, the Bank of PNG states that this is due to unemployment, falling commodity prices and reduced imports.

The report states that while global economic growth maintained its momentum in the second quarter, international prices of most of PNG's export commodities declined, compared to the previous quarter. Also while production of most commodities increased, this was not sufficient to offset the decline in prices and resulted in low export receipts.

In addition, large holdings of export earnings offshore by mineral companies led to a deficit in the balance of payments. During the quarter, the kina exchange rate depreciated against all major currencies, except the Australian dollar.

As a result, the Trade Weighted Index fell by 0.9 percent to 30.87. With the fall in prices of seasonal produce, the inflation rate dropped further to 5.8 percent in the June quarter, while underlying inflation remained relatively low at around 2.0 percent.

Given these developments, the Central Bank maintained its neutral monetary policy stance by keeping the monthly Kina Facility Rate (KFR) at 6.25 percent over the June quarter of 2017.

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Cedric Patjole