Recently released data from Papua New Guinea’s Central Bank indicates the country’s economy bounced back significantly in the September 2021 quarter on the back of a massive increase in export receipts due to higher commodity prices. While private sector employment and sales also rose, the bank warns inflation is also on the march.

The Bank of PNG’s Benny Popoitai. Credit: Post-Courier via Facebook

In the Bank of Papua New Guinea’s latest Quarterly Economic Bulletin, released at the end of April, Acting Governor Benny Popoitai noted that rising global commodity prices have been beneficial to PNG’s commodity exporters.

‘The pick-up in global trade resulted in higher demand and prices for PNG’s export commodities resulting in a higher export receipts and contributed to the overall balance of payments recording a surplus,’ he observed.

The bank recorded higher prices for not just mineral exports, such as copper, crude oil, nickel, cobalt and condensate, but also for ‘all non-mineral export commodities, except for tea, logs and marine products.’

‘Over the year to September 2021, total sales increased by 24.5 percent’

‘The weighted average kina price of PNG’s export commodities, excluding LNG, increased by 20.7 per cent in the September quarter of 2021, compared to an increase of 2.5 per cent in the corresponding quarter of 2020. There was an increase of 16.0 per cent in the weighted average price of mineral exports, compared to an increase of 8.2 per cent in the corresponding quarter of 2020,’ says the Bulletin.

‘For agricultural, logs and marine product exports, the weighted average kina price increased by 41.7 percent, compared to a decline of 18.7 percent in the corresponding quarter of 2020.’

Employment and sales up

There were other positive indicators too. The bank recorded a 0.9 per cent rise in private sector employment in the September 2021 quarter, led by the construction and finance sectors, up from 0.5 per cent in the previous quarter.

The total nominal value of sales by the private sector also increased in the September quarter – evidence that PNG’s economy has rebounded after the 2020 COVID-19 downturn.

‘Annual inflation to 31 December 2021 was 5.7 per cent, up from 4.3 per cent in the September quarter.’

‘Over the year to September 2021, total sales increased by 24.5 per cent, compared to a decline of 22.5 percent over the corresponding period of 2020. Excluding the mineral sector, sales increased by 20.6 per cent over the year to September 2021, compared to a decline of 13.3 per cent over the corresponding period of 2020,’ says the Bulletin.

Sales increased highest in the transportation, wholesale, financial/business/other services, manufacturing, retail and mineral sectors, while the agriculture/forestry/fishing and construction sectors saw a decline in sales.

Echoing the long-held views of his predecessor, Loi Bakani, Acting Governor Popoitai urged the government ‘to continue to support and diversify the agricultural/forestry/fishing sector including downstream processing to increase value added production and improve foreign exchange inflows’.

Inflation warning

The Acting Governor sounded a noted of caution regarding inflation, however.

Increased global activity and ‘demand from large fiscal and monetary stimulus packages’ has led to ‘higher imported prices and domestic inflation’. The situation has since been further exacerbated by the war in Ukraine, he said.

Annual inflation to 31 December 2021 was 5.7 per cent, up from 4.3 per cent in the September quarter. Prices related to education, alcoholic beverages and transportation rose highest, while prices in restaurants and hotels, and communications declined slightly.