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BSP: Economy remains challenged

Monday, October 25, 2021

The current Covid-19 Delta wave is among issues contributing to the revised GDP growth of 1 percent for 2021, well below the earlier forecast of 2.5 percent despite soft commodities benefiting from favourable price shifts.

This is according to BSP Financial Group Limited’s (BSP) Q3 2021 Pacific Economic and Market Insights. The report also stated that while the surge in the number of Covid-19 cases continue to pose a threat to PNG’s economy, businesses and the economy cannot afford nationwide lockdowns.

BSP Group General Manager for Corporate Banking, Peter Beswick said focus must remain on appropriate containment measures and safeguards of masks, social distancing, restrictions on gatherings, and most critically with high levels of vaccination coverage to slow the pandemic, which will in turn reduce the loss of life and stress on health systems and drive our medium term economic recovery.

“Major projects will provide PNG businesses certainty and growth prospects in the economy will remain challenged until resource projects like the Papua LNG finalise fiscal terms and conditions for the project and detailing the framework to complete upcoming negotiations.

“Barrick Gold CEO remains committed to restarting the Porgera Mine in 2022, while Total has announced the remobilisation of the project teams with the objective to launch in early works in late 2022. This positive development follows the Government’s reconfirmation of the Papua LNG Gas Agreement 2019, the signature of the Fiscal Stability Agreement and the License extension,” Mr Beswick said.

Newcrest also recently announced Lihir would be carrying out a Pre-Feasibility Study to accelerate the mine to be a 1 million ounce plus per annum producer from 2024. Mr Beswick said this is another important progression for the economy as “the USD180 million project delivers increased ore reserves, brings forward gold production and improves operational flexibility by establishing an additional independent ore source.”

In the South Pacific region, the economy is projected to contract by 0.6% in 2021, a reflection of severe constraints of the Covid-19 containment measures, particularly border restrictions; continue to have on business activity and tourism in, Samoa, Tonga, Vanuatu and Cook Islands. Fiji is already seeing the positive impact of reopening of its borders to tourists next month following its aggressive vaccination program. Despite the severe economic impact of Covid over the past 2 years, the sub-region's economy is expected to rebound by 4.8% in 2022 as countries reopen borders.