Fiji Time: 12:13 PM on Thursday 18 December

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Building links the way forward

Geraldine Panapasa
Tuesday, December 18, 2012

CHANGES in the global economy will place greater pressure on the smallest Pacific island states to find ways and means of sustaining themselves, says Xianbin Yao, Asian Development Bank Pacific department director general.

But this can be overcome, he said referencing the ADB's recent Pacific Economic Monitor: December 2012 report, if Pacific economies forged greater links within Asia and the North Pacific.

"Looking for opportunities for generating jobs through information technology can help small island states unlock their potential for growth in the face of unique economic challenges," he said.

A significant assessment in the Monitor was Papua New Guinea's position in the region, dubbed 'one of the fastest growing economies in Asia and the Pacific'.

The report said preliminary GDP figures showed a growth of 9.2 per cent in 2012, a drop from an 11.1 per cent growth in 2011.

"A number of factors point to a more challenging economic environment in PNG in 2013," the report said.

"In particular, the 2013 $US6.5billion ($F11.4b) national budget will be accompanied by a significant slowdown in government revenue growth over the medium term, as revenue from declining mining and oil output will offset modest growth in consumption, income and company taxes."

According to the report, PNG's 2013 budget plans for a 23 per cent increase in nominal expenditure, raising the size of the expected budget deficit to 7.2 per cent of GDP.

"Although the economy remains strong, a number of factors point to a more challenging economic environment in 2013," the report said of key issues affecting PNG's economy.

"Maturing mining and oil operations, and the scaling down of liquefied natural gas (LNG) construction, are expected to contribute to slowing economic growth.

"Lower international agriculture prices and a persistently strong kina are also expected to depress rural incomes derived from the sale of export crops."

An escalated increase in the cost of the LNG project from $US15.7b ($F27.8b) to $19b ($F33.7b) because of the high kina exchange rate, work stoppages, and land compensation issues may add pressures to the budget if government is required to increase its equity contributions, the report said.

Meanwhile, the report said the PNG economy was benefitting from lower inflation this year.

The report also noted some declines in international prices of PNG exports.





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