Country Report Papua New Guinea July 2012

Country Report Papua New Guinea July 2012

Outlook for 2012-16

• The political impasse that has persisted in Papua New Guinea (PNG) since mid-2011-a power struggle between supporters of the de facto prime minister, Peter O'Neill, and his opponents-could end following the next election.
• Voting in the parliamentary poll commenced as scheduled in late June, but the contest has been marred by violence and electoral irregularities.
• 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

• On July 9th the parliamentary speaker, Jeffery Nape, was charged with bribery, after his rival for his constituency seat claimed that Mr Nape had tried to bribe him to withdraw his candidacy.
• In East Sepik, the constituency of PNG's previous prime minister, Sir Michael Somare, the counting of votes has been subject to delays. Sir Michael looks to be in a close contest for the seat.
• Mr O'Neill has been officially declared the winner in his constituency in the Southern Highlands province, taking 75% of the votes.
• In its March Quarterly Economic Bulletin, the central bank said that the economy had continued to grow in the first quarter of 2012, driven mainly by construction associated with an LNG project and by government spending.
• In the first quarter of 2012 the headline rate of inflation stood at 4%, down from 6.9% in the final quarter of 2011, owing to the appreciation of the kina against the US dollar, which has helped to restrain rises in import prices.

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