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Old 19-09-2012, 03:21 PM
Cool_Guy1 Cool_Guy1 is offline
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PNG Economic Update for 2012

As construction phase for the LNG project is at its peak, employment growth due to increased economic activity in the private sector has led to favorable economic outlook for PNG for 2012. Inflation outcomes for the June quarter stands at 1.4 percent. Forecasted double digit growths for this year as a result of LNG related private sector activity and the spin off benefits from the project is likely to strenghten the persistent growth in the country.

Growth prospects for countries all over the world have been dampened by the euro debt crisis which seem to have contagion effect on both developed and emerging economies. While those countries are looking at fiscal stimulus to re-ignite growth, PNG has been riding high on large inflows of FDI due to the LNG project and related private sector activity.

Commodity prices have been declining so as government tax collection. Compared to previous years, tax collections for the government should be much lower than what it has been due to decline in commodity prices. There has been much talk about a K500 million budget deficit in the papers. If this was so and the government had to seek funds to re-finance the budget, it would be either domestic or external borrowing, which would result in the debt burden of the government increasing again. Pas few years have been good ride for the government as a result of good prices for its commodity exports, however, this year, the challenge is imminent.

As for business, the properties market seem to have a field day with property prices and rentals sky rocketing. The issue would be, "are this demand drive price increase?" If the price increase are not demand drive but speculative, then it creates what they call a "asset price bubble". When this bubble burst, it can cripple financial systems and even bring the economy to its knees. This is another challenge that hangs in the air for the country.

All in all, the economy is projected to grow for the year 2012. The growth would be significant and it should be monitored properly to contain inflation at a level that is acceptable to the people and businesses of PNG.

cherio
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