PORT MORESBY, PAPUA NEW GUINEA (9 April 2019) — Papua New Guinea’s (PNG) economy is expected to improve despite a major earthquake in 2018, according to a new Asian Development Bank (ADB) report.
ADB’s flagship annual economic report, the Asian Development Outlook (ADO) 2019, says PNG’s economy is set to grow 3.7% in 2019 from 0.2% in 2018 due to a full year of production of key mineral, petroleum, and gas exports, as well as improved access to foreign exchange. The medium-term outlook for PNG’s economy remains positive with growth forecast at 3.1% in 2020.
“Ongoing structural reform and market-focused policies are critical for attracting foreign capital and helping build an economy that is more diversified and shock resilient,” said ADB Country Director for Papua New Guinea Mr. David Hill.
The ADO notes that shortages of foreign currency have been a key constraint on the private sector in recent years, with importers having to queue to receive foreign currency, sometimes for several weeks until it becomes available. During 2018, however, there was an improvement in availability of foreign exchange, with the backlog in foreign currency orders falling by 48%. This trend is expected to continue in 2019, as foreign exchange reserves are released at a steady pace to the market.
Several major resource projects are set to drive growth in the medium term. The Papua Liquefied Natural Gas (LNG) project and the PNG LNG expansion project are forecast to attract foreign direct investment in excess of $10 billion, with construction expected to commence in 2020. The forecast period should also see construction start on the $2.8 billion Wafi–Golpu gold and copper mine project. A telecommunication fiber optics cable connecting Port Moresby with Sydney is scheduled for completion toward the end of 2019 and will significantly increase internet speed while reducing its cost, which should facilitate business growth.
Inflation is projected to ease to 4.2% in 2019 before picking up to 4.7% in 2020 as the commencement of the new projects spur demand.
Agriculture should also expand in 2019 assuming oil palm rebounds towards the kind of output achieved in 2017. Fisheries are expected to grow steadily, and forestry may also expand, although a proposed ban on round log exports may be introduced in 2020, causing production to fall. Coffee, cocoa, and copra will continue to experience volatility in production year on year because of weather variation and changes in global commodity prices. Production of these crops may increase over the longer term, however, with the success of government initiatives to boost plantation production.
ADB has been working with PNG since 1971 and is the country’s largest multilateral development partner. ADB has committed $2.8 billion in loans, $175.6 million in grants, and $76.4 million in technical assistance for PNG.
ADB is committed to achieving a prosperous, inclusive, resilient, and sustainable Asia and the Pacific, while sustaining its efforts to eradicate extreme poverty. In 2018, it made commitments of new loans and grants amounting to $21.6 billion. Established in 1966, it is owned by 68 members—49 from the region.