Papua New Guinea’s economic growth will slow from 7.5% in 2012 to 4.5% in 2013, according to forecasts in the latest edition of the Pacific Economic Monitor, issued yesterday (Tuesday) by the Asian Development Bank (ADB).
The ADB report says that slowing economic growth will contribute to declining government revenues over the next two to three years, placing significant fiscal pressure on the government.
Moderate levels of public debt, and trust fund savings, should allow the government to maintain priority spending without upsetting the fiscal stability that has underpinned the last decade of economic growth, says the report.
“Ensuring this period of lower government revenue does not disrupt service delivery will require the government to continue its prioritisation of funding towards the key development sectors of health, education, infrastructure and law and order,” said Aaron Batten, country economist in ADB’s PNG resident mission.
The latest issue of the report, ADB’s review of the 14 economies of the Pacific prepared three times a year, notes that authorities will also need to reign in growing public expectations about the country’s ability to finance new projects with earnings from the PNG liquefied natural gas project, which are not expected to be large until after 2023.
The Monitor shows that although PNG recorded its 10th consecutive year of economic growth in 2011, the private sector remains small, with less than 10% of the working age population engaged in formal employment in private enterprises.
Employment growth can be encouraged by improving public infrastructure, reducing the perceived riskiness in PNG’s investment environment and encouraging competition, the report says.
PNG joined ADB in 1971. It is ADB's largest partner in the Pacific in terms of loans for public and private sector development
ADB, based in Manila, is dedicated to reducing poverty in Asia and the Pacific through inclusive economic growth, environmentally sustainable growth and regional integration.
Established in 1966, it is owned by 67 members – 48 from the region.