PNG economic outlook gives businesses hope: BSP

BSP’s Robin Fleming

The Standards and Poor (S&P) Global ratings has revised its outlook on Papua New Guinea from negative to stable reaffirming the trajectory of the country’s economic recovery post-Coronavirus (Covid-19).

And Bank South Pacific (BSP) Financial Group Ltd, says the outlook had boosted local business sentiment.

The stable outlook reflected S&P’s assumptions that fiscal consolidation efforts and policies included in an International Monetary Fund (IMF) programme would continue over the next year, narrowing fiscal deficits and stabilising the country’s debt burden.

The report, released last Tuesday, said S&P could, however, lower the country’s ratings over the next 12 months if consolidation efforts did not appear to be taking place, raising concerns about the country’s rapidly rising debt levels and debt serviceability.

Reacting to the outlook, BSP group chief executive officer Robin Fleming said most non-mining sectors also recovered quickly from the pandemic relative to our neighbours in the region and this had provided a good foundation for the post-Covid recovery.

“Commodity prices are the key indicators to watch regarding the direction of PNG’s gross domestic product (GDP) outcomes in the short-run,” the bank said.

“PNG has benefited from high global prices for its major exports in recent months.

“Mining exports in particular have seen sustained price increases which positively impact PNG’s GDP, and present much upside for economic activity and government revenue generation. High prices for oil and LNG exports will likely remain in PNG’s favour so long as sanctions in Europe continue to inhibit supply and the global Covid recovery increases demand.

“Agriculture exports saw some periods of uplift largely due to global supply shocks, which were due to Covid-19 outbreaks affecting labour, bad weather, and global shipping disruptions.

“Resource projects are key to insuring the sustainability of a multi-year fiscal consolidation campaign over the long-run.

Recent announcements made on large resource projects present some upside in the medium term with private investment expected to continue in resource-adjacent industries in the lead up to these projects being realised.”