Page 14 - IB January 2022

Outlook Outlook

LOW VAX RATES A CONTINUING
THREAT TO THE PNG ECONOMY

By Kevin McQuillan

COVID-19 will remain a threat to the Papua New Guinea
economy throughout 2022, due to the low rate of vaccination Govt expenditure:
and poor health infrastructure, compounded by a lacklustre K22.175 billion
foreign investment climate. But these pressures will be bal- (up 9.3% on 2021 MYEFO)
anced somewhat by higher commodity prices and the re-open-
ing of the Porgera gold mine.
Papua New Guinea’s economy is expected to improve this
year, if the Porgera gold mine reopens as expected in April –
seven months later than previously announced. Government revenue:
The re-opening represents a win for the Marape govern- K16.19 billion
ment, as it has successfully doubled equity in the mine to
a 53-47% split. The nearly three-year mine closure cost K1 (up 18.3% on 2021 MYEFO)
billion (US$285 million) per year, according to the Institute of
National Affairs.
“Certainly, the reopening of the Porgera mine will provide
both a significant stimulus, but [will] also be a yardstick for
investment in the resources sector,” says the INA’s Executive Budget deficit:
Director, Paul Barker. -K5.985 billion
But the key driver of growth this year will be the non-
resource sector, which Treasurer, Ling Starkey, says will grow
by 3.9%. It’s the sector in which most Papua New Guineans are
involved. Barker says global prices for many commodities were
strong at the end of 2021. Predicted GDP:
“This extended from oil, gas and vegetable oils, like palm oil
and coconut oil, to metals like copper,” he told Islands Busi- K101.67 billion
ness. “Gold remains strong, and some other agricultural crops,
such as coffee, have rebounded, with forecasts of stronger
cocoa prices as well, in the face of likely production shortages Government debt
from the two main Western African producing countries. to GDP ratio:
“This is already flowing through to famers of some crops,
and, if holding up, will provide a valuable stimulus to the High- 51.9%
lands economy during the main coffee season, even perhaps
countering the disruptive effect on production of the mid-year
election.”

COVID-19 impacts Predicted GDP growth:
The risk is that COVID-19 and social distancing rules could 5.4%
reduce the labour force.
But in its analysis of the economy in 2022, Deloitte points
out that irrespective of the ‘no jab no job’ policy, vaccination
rates continue to be very low, which leaves PNG at risk of
continuing COVID-19 waves and a lagging recovery. On current
projections, Papua New Guinea will fail to vaccinate even a
third of its adult population by 2026. Predicted inflation:
Treasurer Ling Starkey says PNG’s economic growth is ex- 5.6%
pected to be 5.4% this year, up from 1.5% in 2021. But KPMG
Managing Partner Zanie Theron says this is ‘very optimistic’.
Not surprisingly, government health expenditure is fore-
cast to be 33.7% higher than in 2021, rising from K1.745b
(US$497m) to K2.59b (US$738m). Source: Dept of Treasury
K$1 million = US$285,200
14 Islands Business, January 2022