Country Report Papua New Guinea August 2012

Country Report Papua New Guinea August 2012

Outlook for 2012-16

• Political stability in Papua New Guinea (PNG) is likely to improve in 2012-16 as the outcome of the recent general election ends the year-long impasse between the then de facto prime minister, Peter O'Neill, and his opponents.
• Mr O'Neill has formed a coalition government involving around 75 members of parliament, giving him ample support for his new legislative agenda.
• The new government is protected from no-confidence votes for the first year of its term, but there could be residual tensions between Mr O'Neill's administration and the Supreme Court following earlier conflict.
• The economic policy outlook will remain fairly positive, with successive governments continuing to set aside funds associated with PNG's commodities boom and high global commodity prices.
• The Economist Intelligence Unit expects economic expansion to moderate to 6.3% a year on average in 2012-16, from an estimated 8.9% in 2011. Growth will be driven primarily by private consumption.
• There is upside risk attached to our GDP growth forecast, which will be realised if a major investment, the liquefied natural gas (LNG) project in Gulf province, is approved and work on the scheme starts in the next five years.
• Inflationary pressures will persist over the forecast period, owing to strong growth in domestic demand and the government's expansionary fiscal bias. We expect the annual rate of inflation to average 6.6% in 2012-16.

Review

• Mr O'Neill's former deputy, Belden Namah, has not been given a cabinet post following the general election. The prime minister's 33-member cabinet includes a number of first-time members of parliament and several veterans.
• On August 3rd parliament endorsed Mr O'Neill as the country's next prime minister. Mr O'Neill won the support of 94 of the legislature's 111 members.
• With just days to go before the end of counting of votes in the general election, the de facto prime minister, Peter O'Neill, and his predecessor, Sir Michael Somare, agreed to form a coalition government.

Please Note: Due to the Nature of This Report The Toc is Not Available