Papua New Guinea: Economy

New gas exports are forecast to drive a growth surge to 15.0% in 2015 that will subside to 5.0% in 2016. In contrast with mining and petroleum, the rest of the Papua New Guinea economy is projected to grow by a more modest 4.0% in both years. As the economy comes to rely more heavily on resource extraction, policy needs to ensure that the benefits of growth are shared widely to reduce poverty and regional inequality.

Selected economic indicators (%) - Papua New Guinea 2015 2016
GDP Growth 15.0 5.0
Inflation 7.0 5.0
Current Account Balance (share of GDP) 13.5 15.0

Source: ADB estimates.

Economic performance

Economic growth in Papua New Guinea (PNG) rose to 8.0% in 2014 following the commencement of liquefied natural gas (LNG) exports. Growth in other sectors of the economy remained modest. Construction output fell by 6.4% in 2014, and this spilled over into the broader economy, stalling wholesale and retail trade growth at 5.5% and slowing utilities from 9.0% growth in 2013 to 6.0% in 2014. Long-term declines continued at a number of older mining operations, but rising output from a new nickel project meant mining and quarrying as a whole expanded by 5.9%.

Economic prospects

Growth in the gross domestic product is forecast at 15.0% in 2015, slowing to 5.0% in 2016. Leading this growth is the oil and gas sector, as 2015 is the first full year of LNG production. While near a record high, current growth projections for 2015 are significantly below the 21.0% forecast in Asian Development Outlook 2014. This largely reflects the early commencement of LNG production in 2014, which raised the base last year, and the delay of peak production until 2016, which lowers projected production this year. A rebound in the mining and quarrying sector is expected as operations at a new nickel mine continue to expand, more than offsetting declines at a number of older operations. Real growth in the sector will reach 12.0% in 2015, falling back to 3.0% in 2016.

Excerpted from the Asian Development Outlook 2015.