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PNG economy facing ‘significant challenges’ as growth reaches fastest in 40 years

The Papua New Guinea economy is facing significant challenges, as growth reaches 20–22% next year, ANZ Asia-Pacific Chief Economist Glenn Maguire told this month’s 2014 Papua New Guinea Advantage Investment and Infrastructure Summit in Port Moresby.

An increase in interest rates in the United States and a slowdown in China’s growth are the two key risks for the global economy and PNG, says ANZ’s Glenn Maguire.

‘The US has had extraordinarily low interest rates for four or five years now.
‘Companies not just in the US but across the world had become used to those low rates.

‘The global interest rates structure is going be rising, and it’s going to be rising for several years. So, we’re going to be looking at five-to-ten-year drift higher in the global cost of capital—that’s the big change.’

At the same time, China is attempting to deal with its debt levels while it maintains growth. The risk comes if and when China slows further (it’s forecast of growth is expected to be between 7% and 7.5%).

PNG’s challenges

Maguire also warned that PNG faces its own significant challenges as its economy is expected to grow between 20 and 22% next year, ‘probably be the fastest growth any emerging economy has recorded over the past 30-40 years’.

‘It certainly is going to be an outstanding achievement and a growth rate like that will certainly be attracting the attention of off-shore investors and those wanting to do business in Papua New Guinea,’ Maguire said.

He said the workforce had become highly skilled in the mining and energy extraction sector and those workers ‘will probably need to be re-skilled or growth needs to be transitioned to other sectors of the economy.’

Maguire said there were problems and issues in financial markets as well.
‘Perhaps there is too much liquidity in the markets at the moment and a shortage of dollar liquidity.

‘When I look at Papua New Guinea in the context of what is happening in the global economy, I see both those dynamics are occurring.’

This article was kindly provided by www.businessadvantagepng.com

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