2017 PNG Economic Survey

Abstract

This 2017 PNG Economic Survey is written at the start of Prime Minister O’Neill’s second full term, following the June/July 2017 national elections. How can the new government respond both to the current economic difficulties and to longer-term growth and revenue challenges? This Survey examines PNG’s recent growth performance and fiscal and macroeconomic settings. It argues that economic policy in recent years has been broadly pro-cyclical. A high level of government borrowing during the boom years has made it more difficult to borrow when it is needed: now, after the boom. A flexible exchange regime during the boom led to appreciation of the Kina, but now a fixed exchange rate is preventing the economy from adjusting, and deepening the down-swing. Economic and fiscal recovery will require different policy settings. The new “100 Day Plan” has some important fiscal reform commitments, but no reform program will be successful without re-introducing flexibility into PNG’s exchange rate regime.

Keywords: Papua New Guinea, exchange rates, economic development

JEL Classification: O1, E52