Photo credit: ADB
The outlook for Papua New Guinea has been changed from negative to stable by Standard and Poor's Global Ratings.
The stable outlook is based on S&P's belief that fiscal consolidation efforts and measures contained in an International Monetary Fund programme would continue to decrease fiscal deficits and stabilise the country's debt burden over the next year.
According to the research, if consolidation initiatives do not appear to be taking place over the next 12 months, S&P could reduce the country's ratings, increasing worries about the country's fast-expanding debt levels and debt serviceability.
“We could raise our ratings if there were a strong track record of implementing fiscal reforms, thereby improving our view of PNG’s fiscal and debt metrics, as well as a strong improvement in GDP (gross domestic product) growth.
“This is unlikely to occur over the next 12 months,” the credit rating agency said.
“Despite an estimated decline of 3.5 per cent in real GDP in 2020, we expect a modest economic recovery of 1.7 per cent in 2021.
“Buoyant agricultural output and commodity prices drove growth in 2021, and the reopening of resource plants shuttered during the pandemic will support resource-related growth.
“The promise of new resource-related projects in the medium term should improve the country’s economic prospects.”
According to the study, the worldwide pandemic has compounded PNG's underlying budgetary issues.
“Our sovereign ratings on PNG reflect structural constraints inherent in a low-income economy dependent on the mining industry and served by weak institutions.
“The PNG government aims to promote investment and address macroeconomic imbalances and economic diversification.”
Reference: The National (26 May 2022). “PNG economy ‘stable’”
