Papua New Guinea economy set to 'muddle down'

Subject

The political and economic outlook for Papua New Guinea.

Significance

Despite combined GDP growth of nearly 20% over the last two years, the fall in commodity prices has exposed the downside risks in the government's economic strategy and seriously damaged its political credibility. A government cash crisis driven by a 20% fall in expected revenues in 2015 is fracturing the country's politics. Papua New Guinea (PNG) has a history of getting through crises, although this has usually involved a changing of the prime minister and an IMF programme.

Impacts

• The government budget crisis and foreign exchange shortages will hurt growth in 2016.
• There is a risk of forced sale of foreign-owned businesses and land.
• Foreign exchange shortages may be the greatest risk to businesses.