Business confidence in Papua New Guinea is riding a wave of optimism and is likely to exceed the growth forecasts for the year 2012.
This is according to the Asian Development Bank’s (ADB) 2012 Revised Economic Outlook for Business.
Over 80% companies operating in PNG believe their profits will be substantially higher than 2011.
While presenting his research paper at the Chamber Breakfast organised by Port Moresby Chamber of Commerce and Industry (POMCCI) in Port Moresby recently, ADB Country Economist, Aaron Batten said sound economic growth is credited to performance indicators in the non-mineral sector.
Mr Batten said the economic growth has supported a wide range of businesses.
“The support to businesses has been led by the non-mineral sector which has seen an exponential increase in GDP since 2001. The percentage difference to the GDP growth in the non-mineral sector since 2001 is well over 6.5%. This also means that there has been a surge in the private sector employment growth in 2012,”Mr Batten said.
However, Mr Batten said the non-mining sector has reached the peak of this economic cycle as the Foreign Direct Investment (FDI) funded construction binge winds down.
This will change the composition of future growth. The non-mining sector will drop over the next two years as the construction phase of the multibillion kina LNG project winds down. However, PNG economy will ride on the returns of the mineral sector as production peaks in 2014, contributing about 75% to the economic growth, he said.
Meanwhile, the high kina exchange rate over the last 12 months has had an important impact on bringing down the levels of inflation.
“Official figures are saying that level of price growth on an annual basis is now at about 4%. Exchange rate has gone up quite significantly over the last 12 months by 30% against the US and Australian Dollars,” Mr Batten said.
However, the country is expected to see a decline in Commodity Export Revenues and slowing down of Foreign Direct Investment, which will lower demand for Kina in the next 12 to 24 months.