inflation

BSP Group CEO, Mark Robinson said in a recent media release that depreciation of the PGK/USD midrate will benefit exporters as they receive more PGK for their goods, whilst importers will see higher prices as their cost-per-kina increases when purchasing goods overseas to bring into PNG.

“A short-run risk of the PGK/USD depreciation is the potential impact on inflation levels for consumers, while the economy may benefit when the exchange rate system operates effectively without the need for interventions” said Mr. Robinson.

TUC president, John Paska says Papua New Guineans face challenges of affordable, accessible housing, the collapse of essential services like education, and healthcare, rising unemployment rates and a stagnant private sector.

He further highlighted the rise in violent crimes and general law and order issues, especially against the vulnerable including women and children, stating that the moral fabric of society has collapsed.

This is due to the marginal increase in imported inflation from PNG’s major trading partners and increased demand from APEC-related activities, as reported in the Bank of PNG’s Monetary Policy Statement for March.

The slight increase comes despite a downward trend in inflation from 6.6 percent in 2016 to 4.7 percent in 2017, reflecting low economic growth, relative stability in the Kina exchange rate and lower prices of seasonal food items.

In its Quarterly Economic Bulletin for June 2017, the Central Bank says over the four consecutive quarters to June 2017, annual headline inflation trended downward.

Despite total inflation increasing for the June Quarter at 1.2 percent, compared to a 1.1 percent increases in the March Quarter, the Bank states that annual headline inflation continues on a downward trend.

The Bank further said this trend continued to September 2017 with annual inflation at 5.1 percent.

This is a 0.4 per cent increase from 2016 estimates of 6.6 per cent.

This will see domestic goods and services, medical services and housing prices to remain high.

According to the 2017 National Budget, the projected inflation rise for 2017 is reflective the back of several factors.

They include: the kina depreciation and slight pick-up in domestic economic activity relating to the National Elections, minor improvements in commodity prices, and construction of APEC facilities which are expected to boost income and spending.

The outlook revealed that the persistence of high inflation reflects government efforts to sustain public spending and expected kina depreciation.

The report highlighted that in 2017, recovering international oil prices are seen to compound inflationary pressure in PNG.

Rising fiscal deficits and cash flow concerns weigh heavily in the Government’s near term policy concerns.

Public expenditure is budgeted at US$4.8 billion in 2016 (equivalent to 26.2% of GDP) and revenue at US$4.1 billion.

In its March 2016 Monetary Policy statement, Bank of Papua New Guine Governor Loi Bakani stated that the annual headline inflation was 6.4 percent in 2015, compared to 6.6 percent in 2014.

“This outcome was mainly due to the pass-through effects of the depreciation of the kina exchange rate and the El Niño weather phenomenon, which more than offset the effects of low international food and oil prices, increased competition and cheaper imports.”