Papua New Guinea
PNG’s economy has struggled in the face of the COVID-19 pandemic, fiscal constraints, issues in the mining sector and external liquidity challenges. The IMF estimates the economy grew just 1.2% in 2021 following a 3.9% contraction in 2020.
Looking ahead, growth hinges on reopening of the Porgera gold mine and the path of the COVID-19 pandemic; persistent COVID-19 infections weigh on non-resources activity. Proceeds from external concessional loans have increased foreign exchange availability, though an overvalued exchange rate and ongoing foreign exchange shortages remain significant constraints on domestic confidence and investment. Overall, the IMF expects real GDP growth of 4% in 2022, helping economic output recover to pre-COVID levels.
Over the medium term, real GDP growth is expected to average about 3% per annum, driven by the non-mining sector. 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 on commodity prices and slower-than-expected implementation of investment projects in PNG's extractive industries. Foreign exchange shortages, political uncertainty in the lead up to and beyond the 2022 election and policy implementation challenges all add downside risks to the outlook.
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, weakness in the non-mining sector and more recently, the COVID-19 pandemic, have held back income growth. Moreover, income is unevenly spread through the population. Until investment in the LNG and mining sectors picks up markedly, GDP per capita is likely to hover between US$3,000-US$3,500 in the next five years, according to IMF forecasts.