PAPUA New Guinea needs to diversify its economy if it is to sustain growth at its full potential rate, a spokesman for the Asian Development Bank (ADB) has said on the release of recent economic reports.
ADB’s flagship annual economic report the Asian Development Outlook (ADO), released in April, said PNG would have an economic growth rate of 4.3 per cent in 2016, but that this would slow to 2.4% in 2017.
The previous year’s ADO said gross domestic product growth would reach 15% in 2015 on the back of the first full year of liquefied natural gas exports, but that this would subside to 5% in 2016.
ADB’s PNG resident mission country director Marcelo Minc said diversity was important as PNG faced volatility in global commodity prices, lower-than-expected revenue from the resources sector and changing weather patterns.
“Improving infrastructure and expanding private sector participation remains central to achieving broad-based, inclusive and sustainable economic growth,” he said.
The medium-term outlook for PNG’s economy is 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% in 2016 and remain at that level in 2017.
The sustained fall in oil prices has dampened investment expectations in the resources 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, the report said.
In extending its infrastructure development programs with PNG, the ADB announced will focus on transport upgrades to link isolated areas to larger centres, opening up new economic opportunities and reducing poverty.
PNG is ADB’s largest borrower in the Pacific region, with an active portfolio that includes 19 loan and grant projects, eight technical assistance projects and two private sector loan and equity operations.
Cumulative assistance from ADB to PNG has grown sharply from US$1.27 billion in 2009 to US$2.13 billion in 2015, the ADB’s Papua New Guinea Development Effectiveness Brief said, with the active portfolio reaching US$1.04 billion at the end of 2015.
ADB’s operations are concentrated in the Highlands, with transport upgrades, including roads, bridges, airports and ports among the key activities – and close engagement with provincial governments was key to seeing this through.
“One major initiative is the Civil Aviation Development Investment Program, which is improving 21 national airports to provide safer, more secure, and all-weather services,” the ADB said.