Photo credit: Department of Prime Minister & National Executive Council
The country’s treasurer, Ian Ling-Stuckey addressed the parliament when it resumed recently that Papua New Guinea’s domestic outlook on the state of the economy looks to be improving but the current global trend on the international economic situation is looking uncertain and seems to be getting worse with dominant countries looking plausible to head into recession.
“The 2023 budget will be more difficult with this global looming economic uncertainty, if we the Government can study and understand the pressures of this international situation it can help MPs to prepare on how to contemplate the 2023 budget in the next Parliament.” Ling-Stuckey said.
The changes that are taking place globally are well beyond our country’s comprehension in which our economy only accounts for just 0.03% GDP growth in terms of its ranking and capabilities.
Many now expect that major economies will likely move back into a global recession and the International Monetary Fund (IMF) has also released its world economic outlook report showing a decline in global economic growth and a likely forecast on global inflation.
The Treasurer added by sharing a quote from the chief economist of the IMF; ‘The three largest economies which are the US, Europe and China will continue to stall and for many people 2023 will feel like recession and the worst is yet to come’ Ling-Stuckey quoted.
He explained that there are three main factors for this depressing international news: Firstly, is the ongoing and evolving supply chain shortage originating from the Covid-19 pandemic particularly resulting from the constant lockdowns in China. Secondly is the distressing Ukraine- Russian War and thirdly is the looming economic threat on global inflation.
The treasurer went on and pointed out that the inflation rates in the US has dramatically increased from 1.3% in the year 2020 to estimates that currently show a rate of 8.2% in 2022 with inflation hitting consumers at levels not experienced in more than 40 years. Due to this rapid increase in their inflation rates, the US Federal Reserve has lifted interest rates from 0% to 3% and are still considering further increases depending on whether US prices will fall, which does not seem likely to happen anytime sooner and is prompting the US to head into recession,’ he explained.
He further stated that in relation to the economic situation that is trending in the US, Central banks around the world are rapidly increasing their interest rates as well. These global economic issues will have a significant implication on PNG and a huge unfavourable impact on our economy.
“First our export markets will be affected and there will be less opportunities for our coffee, cocoa and other commodities in global markets, secondly our international interest cost will increase and will affect our budget. Thirdly, the economic slowdown will put declining pressure on oil prices,” he said.
Ling-Stuckey reiterated by saying “When sanctions were being imposed on Russia, there were increasing inflationary pressures across the globe with interest rates forecasted to rise and since PNG had insignificant trading partners with Russia and Ukraine our economy was likely to benefit. So, when designing the 2023 supplementary budget with almost 1.2 billion in additional expenditures we understood that the boom in oil prices was temporary. We did not want a repetition of the tragic budgetary mistakes of 2014 by spending excessively before revenues were accounted and received” he said.
Treasurer Ling-Stuckey affirmed parliament that the Marape-Rosso Government is adamant in informing the people of the country about the state of the economy its progresses and development.
