Papua New Guinea’s economic performance is projected to remain subdued for the rest of 2021 but rebound in 2022, according to the World Bank’s latest East Asia and Pacific Economic Update.

The update‘s projection of GDP growth for PNG of just one per cent for 2021 reflects ‘a decline in gold mining and LNG production, and the impact of lockdown measures to counter the COVID-19 waves in March and May’. This growth is largely due to the non-resources economy.

By comparison, the PNG Treasury’s Mid-Year Economic and Fiscal Outlook (MYEFO) predicts growth for this year of 1.8 per cent, and the Asian Development Bank 1.3 per cent.

The World Bank’s outlook for PNG in 2022 is more positive:

‘Contingent on mining output returning to pre-pandemic levels, growth is projected to accelerate to 4.0 percent in 2022.’

‘Political uncertainty will remain until next elections to be held in June 2022, with risks to the negotiation process with current and potential investors and the overall business sentiment.’

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The report cautions, however, that this level of growth will only mean PNG’s economy attains pre-COVID levels.

The bank is predicting GDP growth of three per cent for PNG in 2023.

Uncertainty

The report also warns that PNG’s economic outlook is ‘subject to a high level of uncertainty’.

‘It will depend on export demand, the implementation of new resource projects, government efforts to improve economic and fiscal resilience to external shocks, and the speed of domestic and international vaccine rollouts.’

‘Currently, the vaccination rate in PNG is the lowest in the region and expected to reach only 17 percent by end-2021.’

The report also identified political risks that could impinge on PNGs economic recovery.

‘Political risks to the outlook are also high. Motions of no confidence are relatively frequent, and the political situation remains fluid.

‘Political uncertainty will remain until next elections to be held in June 2022, with risks to the negotiation process with current and potential investors and the overall business sentiment.’

Recommendations

The report makes several recommendations that would help PNG achieve ‘a more inclusive and sustainable development path over the medium term’:

1. Strengthen the macroeconomic policy framework, including a renewed focus on fiscal consolidation [reducing the government’s budget deficit, which is K6.6129 billion
   in the latest MYEFO].
2. Ensure that frontline health services continue to deliver during the crisis.
3. Introduce safety nets for the poor and vulnerable.
4. Support firms and employment in the informal sector.

Regional outlook

The report anticipates that China ‘s economy will grow by 8.5 per cent in 2021, faster than expected, while the rest of the region is projected to grow by just 2.5 percent.

It observes that the ‘uneven’ economic recovery across the East Asia and Pacific region has been negatively affected by the Delta variant of the COVID-19.