PNG economy remains weak

PNG's economy remains weak despite an impressive GDP projection for 2019.

This is according to the ANZ’s Economic Update report of PNG.

ANZ projects an impressive GDP of 3.5 percent for this year, however, says no one should be carried away, as this is all coming from a rebound in gas production following the earthquake-induced disruptions in 2018.

Released on December 17th, the ANZ report warns not to be misled by a strong GDP for 2019, stating the economy remains weak.

The report says the strong GDP is due to a rebound in gas production following the 2018 Highlands earthquake.

The report says take out the contribution of gas (ie production, taxes, royalties, dividends and consumables) and the PNG economy is probably in recession.

ANZ anticipates the economy will remain soft in 2020, mainly due to ongoing weakness in construction, in particular mining investment.

The Report states that economic recovery and a balanced foreign exchange market for PNG is expected in the second half of 2021.

Earlier in the year, ANZ forcasted that PNG’s long-awaited economic recovery will come through in late 2020.

That is now not possible, ANZ states, following delays to endorse the Papua LNG Gas Agreement and failure to complete the P’nyang Gas Agreement by the end of November.

If the P’nyang Gas Agreement can be completed within agreed deadlines, recovery will take a foot-hold from the second half of 2021.

ANZ warns that a longer project dialogue will push the recovery out further with a risk that extended negotiations could derail the economic upturn.

The report also says the Australian USD $300m loan for budget support is helping but it is not enough, with PNG still having a K2 billion of profit repatriation yet to be placed on the order book.

ANZ says large flows associated with the next round of mega-projects provide the best hope of the FOREX market returning to normalcy.

This is another reason why the P’nyang agreement and the associated terms for additional gas development at the Kutubu fields should be finalised sooner rather than later.

Cedric Patjole