Economy to grow 7.1% this year, says forecast

PAPUA New Guinea's economy grew by an estimated 5.5% last year and is expected to grow 7.1% this year, The National reports.

According to the Deloitte Touche 2011 budget alert, the economy was able to weather the global recession of last year reasonably well, with the financial sector remaining resilient due to relatively low exposure to overseas financial instruments and a strong domestic funding base.

However, the most heavily affected sectors were agriculture, forestry, fisheries and the manufacturing sectors due to declining overseas demand.

Themed Building the foundations for economic growth and prosperity, the 2011 budget in many ways can be described as a "steady as she goes" budget, which builds on planning done in previous years and takes advantage of the increased revenue stream expected to be available next year.

As in previous years, the government seeks to promote a stable macro economic and fiscal environment and to that end has announced a balanced budget.

The global recovery together with expected increased commodity prices and production will result in additional mineral revenue in 2011.

The government set out what it saw as a number of risks to the fiscal and economic outlook on which the budget is framed.

These include the fragility of the global economy in terms of its impact on PNG exports and commodity prices, delays to the PNG LNG and other resource projects, and the government diverting from fiscal discipline and adding to already strong inflationary pressures.

On the plus side, it was recognised that a number of mining and gas projects are under active consideration which would provide a boost to the PNG economy if they proceed.

As such, the government will fund its established framework, the national agriculture development plan 2007-2016 with K109 million, with support also going to other sectors of agriculture.

Fisheries will be receiving K55 million to foster investments in marine industrial zones and the Pacific Marine Industrial Zone in Madang.

It will also receive K15 million for the Coastal Fisheries Development Programme.

Forestry will be receiving support in terms of programmes aimed at, among others, support for forest research institute rehabilitation and support for sustainable forest management.