In a detailed economic update presented by Westpac’s Senior Economist, Justin Smirk, at a breakfast meeting organised by the Port Moresby Chamber of Commerce and Industry (POMCCI) as part of the Australia Papua New Guinea Business Exchange, it was highlighted that ongoing delays in major resource projects are putting increasing pressure on both PNG businesses and households.
Justin Smirk. Photo: Dev Nadkarni
The presentation provided an overview of global economic themes, PNG’s economic landscape, and potential steps to mitigate the impacts of project delays. Smirk outlined how the delays in key projects, such as the Papua LNG and Porgera mine, are causing significant strain on the domestic economy. He noted that the resilience of the local economy is being tested, with delays further impacting non-resource sectors and stalling growth.
Global and Local Economic Outlook
Smirk’s analysis of global themes underscored major geopolitical shifts, particularly the intensifying rivalry between the US and China, demographic changes, and the increasing role of governments in responding to economic challenges. He noted that technological advancements, including artificial intelligence, are placing pressure on inflation and could drive significant industry concentration.
In the context of PNG, the delay in resource projects has significantly affected both growth and employment. According to Smirk, although there were positive employment expectations at the start of 2024, these flattened as the year progressed. The non-minerals sector, which initially showed promise, has been hindered by factors such as political unrest, foreign exchange shortages, and regulatory uncertainty.
Economic Forecasts
Looking ahead, Westpac’s forecasts suggest a modest recovery for PNG in 2025, contingent on the progress of the resource projects. GDP growth for 2024 is expected to remain subdued, at 1.5 per cent, reflecting the impact of these delays. However, growth is projected to pick up to 4.0 per cent in 2025, driven by recovery in both resource and non-resource sectors.
The depreciation of the kina was also addressed, with Smirk forecasting a continued gradual decline until the commencement of significant foreign direct investments. He noted that the foreign exchange market remains tight, with further depreciation expected until 2025.
Challenges Ahead
The presentation also identified key challenges facing PNG businesses, including shortages of expertise, foreign exchange constraints, and unreliable utilities. Addressing these challenges, Smirk said, would have a positive impact on the economy, particularly in non-resource sectors.
As PNG looks toward 2025, the country’s economic resilience will hinge on the timely resolution of project delays and a steady recovery in both the resource and non-resource sectors.
