Falling export earnings have impacted the external sector of Papua New Guinea. But surging gold prices and import compression contained the damage.
According to the World Bank PNG’s economic update titled “Dealing with a triple crisis”, the current account surplus broadened in the first half of 2020, which increased by 14 per cent. This was supported by a strong merchandise trade performance. It said that even if prices for major exports were reduced, the earnings from the mining sector, especially gold exports, posted a surplus.
In addition, continued import compression brought about an overall current account surplus. Meanwhile, lower export earnings were more than offset by a 24 per cent decline year-on-year during the first half of 2020.
Negative was the trade services balance, caused by negative balances on education, transport, and other business services. The deficits in income and services narrowed. These developments led the current account into a positive area.
Earning exports decreased by 14.3 per cent, and prices of major exports also dropped since the beginning of the pandemic. Exports from mineral resources - which includes LNG - went down to 15 per cent year on year, crude oil decreased to 22 per cent and copper, 18 per cent. In addition, agricultural commodity exports decreased by 9.2 per cent, caused by lower export values for coffee, cocoa, and logs - with a little bit offset from palm oil exports.
In spite of this decrease, the increase in the cost of gold outweighed all of these impacts, giving rise to the total export earnings to 9 per cent year on year.
