PNG’s economic growth in 2021 is projected to recover at 3.5% while the global economy is projected to grow at double the rate at 6% - a big turnaround from the predicted -3.3% in 2020 when the world was hit by the Covid-19 pandemic.
This was highlighted by BSP Financial Group Limited (BSP), in its first quarterly Pacific Economic & Market (PEM) Insights for 2021.
The PEM Insight attributes the rebound of the PNG Economy to the resumption of Barrick Niugini Limited’s operations at the Pogera Gold Mine and the PNG LNG’s forecast to expand PNG’s liquefied natural gas (LNG) industry.
BSP Group CEO Robin Fleming said the signing of the agreement between Barrick and the Government is well received by the PNG Business Community and accordingly, given businesses much needed confidence in the rehabilitation process of the mine production recommencing which will in turn bring foreign exchange into the country and boost loan and domestic economic activity.
While PNG’s economy is expected to rebound, South Pacific Island Countries have been overwhelmed by the collapse in global tourism, despite few incidences of Covid-19. Growth in these economies is expected to remain around 9% below pre-pandemic levels.
Vanuatu’s economy is projected to increase to 3.2% in 2021, a 12.4% increase from 2020 due to increased fiscal spending on infrastructure.
While the Kina was unchanged against the U.S. dollar in the first quarter of 2021, the USD rallied against most currencies, as higher than expected economic and employment growth created inflationary concerns and fueled speculation that the US Federal Reserve would tighten monetary policy earlier than markets had initially expected.
The level of gross international reserves fell to US$2,410.9m (K8,313.5m) as at 18th March, 2021 from US$2,709.4m (K9,393.2m) at the end of Dec-20. The fall in reserves was mainly due to external Government debt servicing and Central Bank intervention to improve liquidity in the foreign exchange market.
With Porgera mine recommencing production and projected rebound of the local economy later in the year, the insight report also highlighted BSP’s performance and the bank’s goals for the year, the main one being BSP gaining admission to the ASX.
“If successful, we will have access to alternative source capital to fund our future growth ambitions, deliver improved services to our customers and enhance existing shareholder liquidity.” Mr Fleming said.