Medium Term Development Plan, 2011-2015 - UNDP in Papua New ...

· the new era of political stability that has resulted in improved governance and increased private sector
confidence;
· a return to macroeconomic stability underpinned by exchange rate and interest rate stability;
· improvements in infrastructure, especially telecommunications; and
· increased Government development expenditure on public investments.
The 2010 Budget forecasts anticipate this rate of average growth to continue in the period 2010-2014 (figure
2.1). These forecasts are based on an assumption of continued political and macroeconomic stability and take
into consideration the considerable investments associated with establishing PNG’s first LNG project. Also
taken into consideration is the anticipated winding down in production at the Ok Tedi mine by 2013.
A surge in development expenditure for MTDP initiatives to improve infrastructure and services points to even
higher growth than previously anticipated in the Budget 2010 forecasts. Figure 2.1 outlines the MTDP
forecasts for economic growth using the PNGGEM model of the PNG economy taking the additional MTDP
initiatives into consideration. Implementing the MTDP is expected to result in an average rate of growth of 8.7
per cent between 2011 and 2015. Growth is expected to average 7.6 percent through to 2014 before surging
to nearly 14 per cent in 2015 as a result of production commencing in the LNG Project.
2.1
Growth in real GDP, 2010-2015, Budget 2010 and MTDP forecasts
per cent growth
Growth (per cent)
14
12
10
8
6
4
2
0
2010 2011 2012 2013 2014 2015
Budget 2010 forecasts
MTDP forecasts
Source: The MTDP forecasts are calculated using the Government’s model of the PNG economy, PNGGEM
After navigating through difficult times since 2008, the global economy has begun to recover and is expected
to return to normal growth levels during the MTDP period. Importantly, PNG’s main trading partners fared
well during the global downturn, with Australia avoiding recession and China continuing on its path of very
strong growth. Robust growth in China is particularly important for PNG as the revenues received for PNG’s
mineral exports will increasingly become dependent on the dominant China market.
Growth in China is expected to underpin robust prices for PNG’s key mineral commodities during 2011-2015.
However, the current high level of gold prices is expected to recede until a small recovery after 2012 (table
2.1). Oil prices are expected to rise steadily to approach US$100 a barrel by 2015, and copper prices are
expected to remain at current high levels. Strong prices in gold, copper and oil point to a healthy revenue
base for the Government over 2011-2015.
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