The Papua New Guinea (PNG) economy remains resilient, with growth projected to be higher in 2025, compared to 2024.
According to Bank of Papua New Guinea’s (BPNG) March Monetary Policy Growth is expected to be driven by strong activity in both the mineral and non-mineral sectors, supported by high Government expenditure.
“Over the medium term, economic growth is expected to increase significantly, mainly reflecting the anticipated construction of the Papua Liquefied Natural Gas (LNG) Project, and other resource project developments. Global growth is also expected to support domestic activity.
Annual headline inflation of 0.7 percent in the December quarter of 2024 was lower than expected, mainly due to a significant decline in the price of betelnut. Although subsiding, inflationary pressures are evident, as indicated by core inflation outcomes.
In the medium term, inflationary pressures are expected to moderate as foreign exchange inflows improve and the kina exchange rate stabilizes,” the report stated.
BPNG stated that in the foreign exchange market, increased mineral sector inflows, and the Central Bank’s weekly foreign exchange intervention, continue to improve foreign exchange liquidity and promote stability in the foreign exchange market.
“The Bank will continue to implement the IMF reforms and align its monetary and exchange rate policy frameworks to improve monetary policy transmission, correct the imbalance in the foreign exchange market and restore kina convertibility.
This entails the alignment of the monetary policy rate with the exchange rate through the implementation of the crawl-like arrangement for the kina to reach its market value, which is critical to improve competitiveness of the economy and attract foreign investment,” BPNG said.
BPNG said that the MPC remains mindful of potential inflationary pressures, particularly those arising from exchange rate reforms and continues to maintain its tightening monetary policy stance adopted last year.
“The recent decision to reduce the CRR to 11% was aimed at addressing the uneven distribution of liquidity within the financial system and does not indicate any change to the current monetary policy stance. The MPC will closely monitor these developments and stands ready to adjust monetary policy as needed to counter any emerging inflationary pressure,” BPNG added.