Papua New Guinea (PNG) is rich in gold, oil, gas, copper, silver, timber, and is home to abundant fisheries. Its population of just over 7 million is strikingly diverse, organized in small, fragmented social groups and speaking over 800 distinct languages.
Papua New Guinea’s economy performed strongly from around the mid-2000s. While higher commodity prices acted to support incomes, much of the growth in recent years has been attributable to the non-minerals sector, and in particular large-scale private investment in mining and gas production capacity. That said, PNG’s economy remains dominated by two sectors: the agricultural, forestry and fishing sector, which engages most of the labor force (largely informally); and minerals and energy extraction sector which accounts for the majority of export earnings and, from 2015, GDP as well.
2014 saw the completion of a large LNG plant which started exports and are expected to boost overall GPD growth to 16 percent in 2015. However, growth of the non-resource economy has slowed since 2012, mainly a result of the PNG-LNG project moving from construction to production. While exports from LNG will eventually provide revenue to the state, they are unlikely to be felt in the short term. Non-mining GDP is forecast to grow by 4 percent in 2015, supported by a re-bound in the construction sector driven by increased infrastructure expenditure associated with the 2015 Pacific Games facilities, and the ongoing upgrading of the roads.
To diversify the country’s asset base and increase employment, investment is needed in both high quality human and physical capital and institutions. Developing infrastructure – electricity, telecommunications, road and other transport – continues to be a critical precondition for accelerated private sector-led growth.
Translating strong macroeconomic performance and extractive industry revenues into a broad improvement in living standards remains the key challenge for PNG. Ensuring the integrity of the public financial management for service provision, improving effectiveness and efficiency of public spending and service delivery, raising the performance of the civil service, and improving transparency and accountability in budget management will be crucial in converting the forthcoming windfall revenue into inclusive growth and, consequently, a palpable improvement in the livelihood of ordinary citizens.
Last Updated: Apr 08, 2015