Commentary on PNG's mid-year economic outlook
In August, PNG's Department of Treasury released the mid-year economic outlook, followed closely by a supplementary budget.
— By APNGBC, Various
In August the Department of Treasury released the mid-year economic outlook report, which can be accessed here.
APNGBC has collated some commentary on the report below.
From ABC's Eric Tlozek - Papua New Guinea cuts spending again as falling commodity prices bite (28th August)
The Papua New Guinea Government has announced more spending cuts and revenue raising measures in a bid to reduce a deficit blowout.
The Government handed down a supplementary budget, saying it would cut spending by 928 million kina ($377 million) and raise a further 958 million kina ($389 million) in order to keep its deficit at 2.1 billion kina ($854 million), rather than a projected 3.9 billion kina ($1.58 billion).
From David James, Business Advantage: Papua New Guinea’s mid-year economic report paints gloomy picture, with some positives
The Papua New Guinea Government has released its Mid-Year Economic and Fiscal Outlook Report and the picture of far from rosy: GDP growth is expected to be weaker, tax revenue is lower than expected and public debt is rising above the legislated limit. However, the country’s continued trade and current account surpluses provide ground for optimism.
Paul Flanagan provided some analysis on the mid year economic and fiscal outlook report from PNG and followed up with an analysis on PNG’s 2016 supplementary budget.
Some notable extracts below
- The level of revenue decline and budget blow-out is nearly, but not quite, as severe as last year (a loss of K1,886m vs K2,545). The greatest concern is the source of these revenue drops.
- Last year, K1,349m of the drop came from resource taxation. This year, because almost nothing is being collected, the reduction is only K41m. However, there are massive reductions in company tax collections of K562m and personal income tax collections of K434m.
- GST is down by K328m, excise duty by K164m. The fall in revenue In these key non-resource revenues point to a much wider economic malaise than last year.
- There is also much less room to move given the expenditure cuts last year and the problems in raising domestic finance to meet the large budget deficit.
- This is a riskier situation than last year.
On 25th August, PNG’s Treasurer released a supplementary budget. As indicated in my earlier notes, having a mini-budget to address the fall in revenue covered in the MYEFO was a vital step for prioritising expenditure cuts and building confidence.
So the Supplementary Budget is, in itself, a very positive thing. A lesson does appear to have been learnt. Paul Flanagan’s assessment of the Supplementary Budget is available at here.
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