LNG boosting growth: Report
GROWTH in Papua New Guinea this year is primarily driven by a rebound in mineral production, including liquefied natural gas (LNG), oil, condensate, and gold, according to the Asian Development Bank Outlook report 2019.
The increase in LNG production is greater than earlier forecast partly because 2018 production was less than initially estimated, lowering the base for growth in 2019, but also because production levels were now expected to be higher than projected earlier.
Meanwhile, growth in the economy outside of mineral extraction was weaker than expected in the first half of the year.
This is reflected in credit to the private sector growing by only 3.7 per cent year on year to May 2019, and by lower than expected government tax revenue.
There has been some improvement in the availability of foreign currency, but this has been insufficient to significantly spur the private sector, which continues to face delays in accessing it.
In addition, a change of government in May temporarily unsettled business confidence. Agricultural output is expected to be weaker in 2019 than earlier forecast.
World prices for palm oil have been declining and production in the first quarter was at its lowest level in two years.
Projected growth in construction is revised down as well because government capital expenditure fell below target in the first half of the year.
The 2020 growth forecast is revised down as oil production is projected to decline and with delays experienced to the start of two large projects: Papua LNG and the Wafi-Golpu gold and copper mine.
Some work may commence on these projects in 2020, but significant activities are not expected to commence until 2021.
The forecast for inflation is revised down for 2019 in line with slower growth outside mineral extraction and following 5.3 per cent contraction in broad money supply in the year to May 2019.
Consumer prices rose in the first three months of 2019 by just 0.7 per cent quarter on quarter, the lowest quarterly increase in five years.
Prices fell for healthcare, clothing and footwear, alcoholic beverages, and betel nuts but crept higher for education and for hotels and restaurants.
Lower projected growth in 2020 prompts a steeper forecast downgrade for inflation next year.
The current account surplus equaled 22.3 per cent of GDP (gross domestic product) in the 12 months ending March 2019, driven by exports of LNG equal to 15.8 per cent of GDP and of gold at 9.6 per cent.
The forecast for the 2020 current account surplus is revised higher because the delayed start of new projects will keep imports below earlier projections.