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PNG's Growth to Remain Strong but Protection Needed against Future Shocks
PORT MORESBY, PAPUA NEW GUINEA – While PNG's medium term growth outlook of 5.5% in 2013, and 6% in 2014 remains strong, provisions must be made to allow the economy to withstand future economic shocksaccording to the new issue of the Asian Development Bank's (ADB) Pacific Economic Monitor, released today.
The report—a tri-annual economic review of ADB's Pacific developing member countries—says as the construction phase of the PNG Liquefied Natural Gas Project winds down, economic growth in PNG will be supported by increased government spending and output from mining operations.
"It is critical that government plans to increase investment in national infrastructure and social services are balanced with maintaining fiscal buffers that will allow PNG to withstand future economic shocks," said Aaron Batten, Country Economist of ADB's PNG Resident Mission.
The ADB report offers policy advice on how fiscal risks may be reduced against a backdrop of increased government spending.
Key policy recommendations in the report include: slowing spending growth to reduce the size of future budget deficits; shifting the focus of spending towards routine maintenance of existing capital assets; restructuring the domestic debt portfolio to reduce how often government needs to refinance its debt; ensuring all public debt is created and recorded through the annual budget process, and; cautious utilization of potential new foreign sources of debt to ensure exchange rate risks and debt servicing costs remain moderate.
These policy recommendations will be vital in building up the country's economic resilience and avoiding the boom-bust cycles of economic growth that have plagued PNG's economic development in the past.
PNG joined ADB in 1971. It is ADB's largest partner in the Pacific in terms of loans for public and private sector development.