Thursday, May 17, 2012

ANZ: Growth outlook for PNG looks strong

The growth outlook for PNG remains strong, supported by government spending, commodity prices and the construction of the LNG project, according to the ANZ Pacific Economic Quarterly report released yesterday (Wednesday), The National reports.
The LNG project site outside Port Moresby… ongoing construction of the LNG project should continue to support projected growth of 7% in 2012.-Nationalpic by MALUM NALU

It also highlighted that political tensions had eased as the national elections approach.
“The construction of the LNG project, government-donor funded projects and strong private sector activity growth saw employment grow 6.2% year-year-on in Q4 (fourth quarter) 2011,” the report said.
“Credit growth slowed to 6.8% year-on-year in Q4 2011 compared to 10.6% previously.
“Though slowing growth is having a lesser impact on inflation, the central bank is concerned by high levels of liquidity from increased government spending and foreign currency inflows that may potentially threaten price stability.”
The report said high liquidity concerns saw the central bank endeavour to tighten monetary policy in Q1 this year through new central bank bills and an increase in banks’ cash reserve requirements, from 1% to 7%.
“However, the tightening approach did little to arrest a decline in interest rates: the 28-day bill rate stood at 2.40% at March-end and declined to 2.24% in early May,” it said.
“The kina has appreciated 3.9% against USD (US Dollar) so far this year.
“Inflation pressures will ease further if businesses pass on the currency’s strengthening to consumers.
“Recent political tensions have eased on the government’s commitment to issue writs on May 18 to be followed by a five-week election campaign.
“While the economic outlook for 2012 remains positive, softer commodity prices may result in a budget deficit.
“Government spending and ongoing construction of the LNG project should continue to support projected growth of 7% in 2012.
“We anticipate interest rates to remain under downward pressure, unless the central bank imposes further tightening measures.”

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