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PNG—Strong mining exports and better FX availability support outlook
Optimism surrounds PNG’s economic prospects. The World Bank and IMF forecast GDP growth to accelerate to 4.7% in 2025, supported by strong growth in the resources sector and resilience in the non-resource sector amid better access to foreign exchange. IMF supported reforms are also aiding business confidence; a survey of PNG CEOs shows an improved outlook for 2025 profits, investment and recruitment.
Significant increases in gold, copper, coffee and copra exports underpin the resources sector. In particular, production capacity of Porgera gold mine is expected to increase to 75% this year from 40% last year, while gold prices recently reached record highs. Meanwhile, Central Bank reforms have enabled greater exchange rate flexibility, kina depreciation and subsequent buildup in foreign exchange reserves (Chart). Still, while foreign exchange market liquidity is improving, shortages continue to add uncertainty and weigh on investment and consumption. Indeed, access to foreign exchange remained the greatest concern reported by CEOs earlier this year with 67% citing it as a critical impediment, followed by security/law & order (46%) and reliability of utilities (46%). The Central Bank continues to manage the pace of depreciation and support the USD/PGK to prevent excessive volatility (with the AUD/PGK allowed to fluctuate more widely).
With foreign exchange shortages easing, PNG importers are placing larger orders, suggesting strong underlying domestic demand. Australian exporters may see growing opportunities, including for inputs to PNG’s commodity sector. That said, the outlook is uncertain and downside risks prevail. Lower commodity prices, weaker external demand, unstable supply of critical utilities, natural disasters, and political and social instability could undermine reform implementation and hinder growth. Further kina depreciation expected throughout the year, which will improve PNG’s export competitiveness, could also attenuate growth in PNG’s import demand.
