While Papua New Guinea (PNG), the sub-region’s largest economy, has enjoyed robust economic growth over the last decade, the country now faces fiscal challenges due to volatility in global commodity prices, lower-than-expected revenue from the mineral sector and changing weather patterns, says a new Asian Development Bank (ADB) report.Asian Development Outlook (ADO) 2016 says economic growth in PNG will reach 4.3% in 2016, slowing to 2.4% in 2017. ADO is ADB’s flagship annual economic report.
“Economic diversification will be very important if Papua New Guinea is to sustain growth at its full potential,” said Marcelo Minc, Country Director of ADB’s Papua New Guinea Resident Mission. “Improving infrastructure and expanding private sector participation remains central to achieving broad-based, inclusive and sustainable economic growth.”The report says the medium-term outlook for PNG’s economy remains positive, with economic growth expected to pick up in 2018, but this will depend on effective macroeconomic management over the short-term. Inflation is expected to increase to 6.0% in 2016 and remain at that level in 2017.
The sustained fall in oil prices has dampened investment expectation in the mineral sector, which had been the main driver of growth until recently, and is expected to be the source of economic growth in the medium-term with the start of large mining projects.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.