In its first quarterly Pacific economic and market (PEM) perspectives for 2021, BSP Financial Group Ltd forecasted 3.5 per cent economic growth for PNG this year.
The bank estimated that the global economy will rise at a rate of 6% in 2020, up from a predicted -3.3 per cent in 2020 when the world was struck by the Covid-19 pandemic.
The resumption of Barrick Niugini Ltd operations at the Porgera gold mine, as well as PNG LNG's forecast to expand PNG's liquefied natural gas (LNG) industry, were credited by the Pem insight for the recovery of the PNG economy.
The signing of the agreement between Barrick and the government was well-received by the business community, according to BSP Group CEO Robin Fleming.
He said that the agreement had given companies much-needed interest in the mine production restarting operation, which would bring foreign exchange into the country and improve loan and domestic economic development. Though PNG's economy is projected to recover, Pacific island countries have been hit hard by the global tourism slump, despite the virus's low prevalence.
The economies of these countries are forecast to grow at about 9% below pre-pandemic peaks.
Owing to expanded fiscal investment on infrastructure, Vanuatu's economy is expected to grow to 3.2 per cent in 2021, up 12.4 per cent from 2020.
Although the kina remained unchanged against the US dollar in the first quarter of 2021, the dollar strengthened against most other currencies as higher-than-anticipated economic and job growth raised inflationary fears and fueled optimism that the US Federal Reserve would tighten monetary policy sooner than expected.
The country's total foreign reserves fell from US$2.7 billion (K9.39 billion) at the end of December 2020 to US$2.41 billion (K8.31 billion) on March 18, 2021.
The drop in reserves was mostly due to external government debt servicing and Central Bank intervention in the foreign exchange sector to increase liquidity.
BSP's results and targets for the year were outlined in the paper, with the key target being access to the Australian stock exchange.
“If successful, we will have access to alternative source capital to fund future growth ambitions, deliver services to our customers and enhance existing shareholder liquidity,” Fleming said.
