"We declare our first goal to be for every person to be dynamically involved in the process of freeing himself or herself from every form of domination or oppression so that each man or woman will have the opportunity to develop as a whole person in relationship with others".

- Papua New Guinea National Goals and Directive Principles

Thursday, 26 May 2011

PNG's 8 percent growth to be accompanied by inflation

Wed, 25 May 2011

 PORT MORESBY, PNG (RADIO AUSTRALIA) ---- Papua New Guinea's economy is expected to grow by a staggering 8 percent this year.

PNG's Treasurer, Peter O'Neil says a boom in the mining and petroleum sectors fuels the positive economic outlook. But he has warned that there's also going to be a high inflation, which will hit low-income earners hard, as Firmin Nanol reports from Port Moresby.

Presenter: Firmin Nanol
Speaker: Peter O'Neil, PNG Treasurer

NANOL: Treasurer Peter O'Neil says the boom in the mining and petroleum sectors saw an influx of foreign investors, and an increase in business activities in the country since 2007. Mr O'Neil says the main driving force behind the strong economic outlook is the multi-billion dollar PNG Liquefied Natural Gas or LNG project.

O'NEIL: The real GDP growth is expected to be around eight per cent. The kina has regained its value against major currencies since its lowest level in 2002. It's a remarkable and unprecedented achievement. Mr Speaker the outlook for 2011 is very positive. The economy is expected to grow largely driven by the expected ramping up of the PNG LNG construction activity, and a strong growth in mining and agricultural sector.

NANOL: The Treasurer however, says despite the positive economic outlook, inflation will remain high. Peter O'Neil says the high inflation rate of 8 per cent will really affect the medium to low income earners.

O'NEIL: There are a few challenges that remain and one of the key challenges is inflation, which remains persistent and is threatening the macro-economic stability. Our forecast for the inflation for 2011 is eight-point-two per cent Mr Speaker. The key challenge for the government is to maintain strict adherence to the 2011 budget while the LNG construction activity gains momentum. This also requires a close coordination of monetary and fiscal policies. To achieve this the government is working closely with key agencies, such as Treasury, Bank of Papua New Guinea, each month in monitoring the performance of the economy.

NANOL: He says the government will do its best to control and minimise the impacts of a high inflation rate on ordinary people and businesses. The Treasurer Peter O'Neil says the Central Bank will also control the monetary policy to cushion off any long-term impacts on the economy.

O'NEIL: The other major challenge is the management of the impact of the LNG project, which includes the large revenue flows arising from this project. To address this problem the government has already approved the establishment of the Sovereign Wealth Fund. This is an appropriate mechanism to strengthen existing framework in ensuring that macro-economic stability and fiscal sustainability continues, whilst at the same time we address our development needs of our country

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