World Bank’s latest economic update for PNG forecasts drop in growth rate to 3 percent; calls for greater investment in human capital
PORT MORESBY, 7 February 2020: The economy of Papua New Guinea (PNG) continues to face economic headwinds resulting from global and domestic economic uncertainties, according to the latest World Bank economic update for the country, released today.
PNG Economic Update: Facing Economic Headwinds looks at key recent developments in PNG’s economy and places these in a longer-term and global context.
According to the report, PNG’s GDP growth surge in 2019 was driven by a rebound in the resources sector of the economy (following the February 2018 earthquake), which masked slower growth of the non-resource economy. This in turn has been reflected in sluggish domestic demand, as confirmed by a shortfall in non-resource tax revenue and lower inflation.
GDP growth, which rebounded to 5.6 percent in 2019, is expected to fall and hover at around 3 percent on average between 2020 and 2022, posing many negative risks, including exposure to unexpected external shocks or potential domestic political and economic turbulence, according to the report.
“PNG’s growth outlook remains positive, but projected GDP growth rates are lower than our previous forecasts, mainly due to delays in finalizing agreements and launching large new resource projects,” said Ilyas Sarsenov, World Bank Senior Economist for Papua New Guinea.
The report also cites heightened global uncertainty as a reason for the downgrade in the growth outlook, including the recent partial trade deal between the United States and China and the emergence of new risks to Chinese and global growth, including the recent coronavirus outbreak. The recent tariff cut by China, despite the coronavirus, is a welcome positive signal for the global trade.
The report also provides an in-depth examination of the relationship between inclusiveness of growth and human capital (the health, knowledge, skills and resilience people accumulate). The report evaluates the implications of recent trends and policy reforms alongside the government’s stated development objectives, emphasizing that increased investment in human capital will be a critical prerequisite to achieving quality and inclusive growth in PNG.
To accelerate inclusive development, in addition to the recent initiatives to improve infrastructure connectivity, the report stresses that it will be important for the government to make education and healthcare more accessible and affordable and create more opportunities for skills development, particularly among youth.
The Papua New Guinea Economic Update is available to read in full at: www.worldbank.org/en/country/png/publication/papua-new-guinea---facing-economic-headwinds.
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