Papua New Guinea Country profile

papua_new_guinea_country_profile-2.jpg

Following the quake-affected economic contraction in 2018, real GDP grew at more than 4% in 2019 on the back of increasing production of LNG, gold and copper. But the outlook remains challenged, and growth will likely remain at around 2% in 2020 and 2021 according to IMF forecasts. Slow implementation of resource projects, including Papua LNG and Wafi-Golpu has delayed PNG’s economic recovery. Although proceeds from external concessional loans has increased foreign exchange availability, ongoing foreign currency shortages will continue to hinder domestic confidence and investment in the sluggish non-mining sector. Government belt-tightening will continue to weigh on public sector investment.

In the next few years and beyond, the development of LNG and mining projects bolsters growth prospects. However, stronger productivity and new growth opportunities outside the resources sector requires significant improvements in governance and economic and social infrastructure. Risks to growth stem from weaker global demand weighing more significantly on commodity prices and even slower-than-expected implementation of investment projects in PNG's extractive industries. PNG is also exposed to environmental risks, as evidenced in recent years.

Figure

GDP per capita rose solidly in the early to mid-2010s, in large part supported by rising commodity prices and increasing construction and employment related to the PNG LNG project. But since 2014, lower commodity prices, the completion of PNG LNG construction and weakness in the non-mining sector have held back income growth. Moreover, income is unevenly spread through the population. Until investment in LNG and the mining sector picks up markedly, GDP per capita is likely to remain broadly stable around US$2,750 in the next few years, according to IMF forecasts. PNG’s income levels are broadly similar to those in Nigeria, Angola and Honduras.

Figure