Opportunity to focus on markets closer to home
27 June, 2019, 8:30 am
ECONOMIC conditions over the next year and a half may be tough but just hang in there and we’ll get through, says a Pacific macroeconomist.
ANZ international economist Dr Kishti Sen, during an interview with this newspaper on Tuesday, said with the country’s economic growth predicted to slip below 3 per cent over 2019 and 2020, there was a need to manage costs, run lean operations and be ready to take advantage of the next upswing which would coincide with a stronger global economy.
Dr Sen said there was also a good opportunity for exporters to focus on markets closer to home, such as Papua New Guinea which had a strong growing economy, rather than relying on distant economies such as China.
He said with the current uncertain and weak external environment, tourism and remittance flows could be expected to slow, and construction activity in the country was also close to peaking.
According to Dr Sen’s analysis, industries which are forecasted to experience slower growth rates in the 2019-2020 period compared with the 2017-2018 period include real estate services, accommodation and food services, transport and storage, construction, agriculture, forestry and fisheries, to name a few.
Conversely, a higher growth rate for the 2019-2020 period is forecasted for industries such as manufacturing, professional, scientific and technical, administration and support services, and health.
Overall, growth in economic activity is forecasted to slow to 2.8 per cent in 2019 and 2.5 per cent in 2020.
On the subject of liquidity, Dr Sen said it was predicted to go higher this year because of an increase in supply of foreign currency through direct investments, donor funded projects and offshore borrowing to finance budget deficits, as well as policies such as price adjustment to reduce the volume of car imports.
He said it was unlikely the interest rates would be raised any time in the near future.
Devaluation was also highly unlikely, he said, unless there was an external shock which was not being forecasted.