"The global outlook coupled with delays to key domestic resource projects, present a challenging period for PNG and its government to navigate," said BSP Group Chief Executive Officer, Robin Fleming, when releasing the BSP Economic & Market Insight December quarter publication this week.
Mr Fleming has highlighted the potential impact of uneven global economic growth on the PNG economy with the following salient points supporting BSP's views as presented in the quarterly publication:
- Global growth is projected to increase slightly to 2.5% in 2020, up from 2.4% in 2019 (the lowest rate of expansion since the GFC).
- East Asia & Pacific region's growth is projected to ease to 5.7% in 2020 amid continued domestic and external headwinds, including the impact of trade tensions.
- PNG's economy is forecast to moderate in 2020 to 2.8%[i], after its 2019 growth recovery of around 5.0%[ii], when output in the extractive sector returned to pre-earthquake levels. The softer 2020 growth outlook is driven by slower growth in the extractives sector with some counter balancing growth from the non-extractives sector.
- Delays to key domestic resource projects are likely to negatively impact PNG's growth over the short-term, with P'nyang negotiations called off and Wafi-Gulpo negotiations yet to recommence.
Commenting on PNG's 2020 budget released late last year, Mr Fleming said: "BSP commends the Government for undertaking the challenging exercise of restating and reforecasting the Budget number and intend to support it where possible. For example, BSP will support its endeavours to grow the agriculture sector and SMEs," he said.
BSP Group General Manager Corporate Banking, Peter Beswick noted that the prevailing customer sentiment has softened over the last 12 months, stemming from the delay in announcements of key resource projects. "However, our customers understand the significant economic impact and business upside delivered from these projects and that it takes time to finalise the right outcome for all stakeholders."
Mr Beswick added, in the interim, he and his team will hold regular "check-ins" with customers to better understand their situations and identify ways to add value and enhance productivity.
"In short, our BSP Corporate team will continue to work with our customers - partnering them over the long-term, through all economic cycles as trusted advisors," he said.
[i] Averages are based on World Bank, IMF, ADB and PNG Treasury estimates and forecasts.
[ii] Averages are based on World Bank, IMF, ADB and PNG Treasury estimates and forecasts.