THIS year will be the fifth year that Papua New Guinea will enjoy economic stability, Bank of PNG Governor Loi Bakani said, The National reports. He said this on Tuesday when presenting a paper on PNG economic update at the PNG Indigenous Business Summit and Trade Expo at Kokopo, East New Britain.
He said the estimated gross domestic product (GDP) from 2007 to this year was 7.6%.
He said this was an increase of 31% – from K1,348 per person in 2007 to K1,760 per person this year – and was a major improvement on the economic conditions of economy and average per capita income in PNG.
“This trend is projected to continue for the next two years or so during the construction of the liquefied natural gas project.”
“When we come to the production and exportation of the LNG project, this is projected to go on further.”
He said to give a background of improvement in economy in the last few years, we had to depend on the external sector which was the global economy.
“PNG has the opportunity of having a stable government in the last few years and that was our problem in the past as unstable governments created a lot of uncertainty in terms of having inconsistent policies.”
“Stable government has been one of those prominent components in stability and is reflected in our economy.”
Bakani said while there was macroeconomic stability, businesses should take advantage of it to expand activities because when the tide changed (instability), volatility in exchange, high interest rates and volatile inflation would cause businesses to have doubts about doing more business.
“The improvements to rural infrastructures, marketing, down-stream processing, value-added activities and products and participation of local businesses and entrepreneurs in the agriculture sector should be the focus of government.”
Bakani said the summit would address how best local businesses, groupings like corporative societies, youths and women’s groups could participate meaningfully in some of these activities to empower them in deriving benefits from the LNG project and strong economic growth.
“We, at the central bank, will do our best to ensure the exchange rate appreciation is not pricing out our traditional export sector, making us uncompetitive in the international commodity markets.”
Meanwhile, Bakani said the government must focus on developing the traditional industries especially the agriculture sector which could alleviate the Dutch Disease.
Dutch Disease or the resource curse refers to an economic condition where a mineral boom leads to an appreciation of the exchange rate, which in turn depresses output in the tradable sector, in this case, agriculture.
He said the government must concentrate on improving the social indicators such as health, education, law and order and encourage local business as ways to lessen the Dutch Disease.