PAPUA New Guinea’s gross domestic product (GDP) is expected to increase significantly next year and in 2015 as export of liquefied natural gas (LNG) begins, World Bank said.
During the East Asia Pacific Economic update yesterday, World Bank revealed that with 90% of the US$19 billion (K45.89 billion) PNG LNG project being constructed as of last August and first export next year, significant fiscal and investment risks associated had diminished greatly.
However, the bank also said PNG’s economy was slowing down from very strong growth rates of recent years as the LNG construction phase was set to complete as well as the weaker external demands weighed on domestic activity.
Timothy Bulman, country economist with World Bank Pacific department said that, with the winding up of the construction phase of the PNG LNG project also meant that jobs that were available on the project’s construction were coming to an end.
“This means that those people will need to find new sources of income,” Bulman said.
He added that this is happening at a time when other sectors of the economy were weakening, too.
“In agriculture, prices and production of cocoa, coffee and copra as well as prices for palm oil have been lower than recent years, and this is reducing rural incomes despite some offset from the weaker kina.
“The weakening in hard commodity prices is affecting profitability and employment as well as exploration and investment in various mines around PNG.
“The two of these effects, on top of the winding up of LNG construction, are reducing demand at for locally manufactured goods, which in turn dampens their profitability, investment and employment”.
Meanwhile, World Bank stated that given the expensive fiscal and monetary response to global economic crisis that had build up in the countries, respective East Asia Pacific authorities needed to be ready to respond to steady increase in interest rates in advanced economies and double efforts to restore and maintain financial stability.
The bank added that the countries needed to improve their investment climate by investing more in agriculture, while making public investment more efficient.
That would provide for firmer global growth prospects, which can help developing countries pursue reforms that will enable them to benefit from the recovery and put their own growth in a more stable footing.