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Monday, 07 March 2016

Fall in Commodity Prices Rings Alarm Bells in Papua New Guinea

Resource-rich Papua New Guinea (PNG) is seen as an economic powerhouse in the Pacific Islands with a state-led focus on resource extraction initially expected to drive one of the world’s highest growth rates of 15 per cent last year. But in the wake of falling commodity prices, GDP growth has plummeted from 8.5 per cent in 2014 to a forecasted 3 per cent this year. As the government faces a growing deficit between revenue and expenditure, exacerbated by high public debt, experts in the country believe greater efforts to diversify the economy are essential. “The development of the SME (small and medium-sized enterprise) sector and agriculture sector is crucial to cushion the economy from falling prices,” economist, Busa Jeremiah Wenogo, in the capital, Port Moresby, told IPS, adding that “there is already consensus from some experts that lower commodity prices will require the government to diversify the economy to reduce its dependency on foreign dollars generated through its exports. However, we will have to wait and see how it all plays out.” The concerns of Wenogo and Hetha Yawas, Chair of the Rural Women’s Empowerment Association, are for many citizens who struggle for a living outside the formal economy with poor access to infrastructure and services. The southwest Pacific Island state has significant resources, including oil, gas, copper, gold, silver and timber, and the extractive industry has been worth about K150 billion (US$49.3 billion) since Independence in 1975. But corruption and low corporate taxes are among the causes of the discrepancy between extractive wealth and persistent hardship. Forty per cent of the country’s 7.3 million people live below the poverty line, 12 per cent have access to electricity and less than 5 per cent to formal sector employment.

Source: Inter Press Service