Papua New Guinea was amongst the world’s fastest growing economies in 2014 and 2015, but slumping global commodity prices, drought and chronic shortage of foreign exchange have weighed heavily on growth over the last few years. The outlook will remain challenged, particularly as the government reduces spending to narrow the large fiscal deficit in response to the drop in commodity prices. A lack of foreign exchange is significantly constraining trade, with exporters to PNG reporting difficulty in converting Kina revenues into foreign exchange. It is also limiting imports of capital and intermediate goods which will weigh on domestic investment.
Long term, the development of LNG and mining projects will buttress growth. However, stronger productivity and new growth opportunities outside the resource sector requires significant improvements in governance and economic and social infrastructure.