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

Table 2.1– Forecast world prices for oil, gold a nd copper, 2010-2015
2010 2011 2012 2013 2014 2015
Oil US$ a barrel $72 $76 $84 $92 $100 $105
Gold US$ an ounce $1118 $1010 $873 $885 $933 $975
Copper US$ a tonne $6762 $7025 $7779 $7434 $7021 $6588
Source: Official forecasts of the Australian Government
Table 2.2 provides detailed forecasts of a range of key macroeconomic variables for 2011-2015 with the
implementation of the MTDP. Strong capital inflows associated with investment in the LNG Project and robust
commodity prices are expected to underpin a strengthening of the exchange rate over most of the MTDP
period. This is despite growth in import volumes exceeding growth in export volumes. Strong import growth is
associated with a surge in investment driven by the LNG project as well as robust growth in consumption.
Papua New Guinea’s national income is expected to expand at an unprecedented pace during 2011-2015,
providing the basis for the strong growth in consumption.
Table 2.2 – Forecast growth for key macroeconomic variables, 2 011-2015
2011 2012 2013 2014 2015
Real exchange rate (positive is appreciation) 6.7% 2.8% -2.9% 4.2% 2.4%
Real GDP 11.0% 7.7% 2.9% 8.6% 13.7%
Real non-mining GDP 11.2% 9.1% 7.3% 9.0% 8.4%
Real Gross National Income 11.1% 10.5% 3.7% 9.0% 11.9%
Real consumption 13.6% 8.9% 2.8% 7.8% 6.6%
Real investment 28.6% 12.7% 6.8% 12.0% 6.5%
Export volumes 7.6% 5.6% -5.8% 7.4% 23.1%
Import volumes 14.5% 11.5% 1.5% 10.8% 12.5%
Source: Forecasts are calculated using the Government’s model of the PNG economy, PNGGEM
2.3 Political stability
As discussed in the previous section, the sustained, rapid growth experienced by PNG since 2005 can in part
be attributed to the nation’s newfound political stability.
Prior to the adoption of the Organic Law on the Integrity of Political Parties and Candidates (OLIPPAC) PNG’s
political, social and economic conditions were in a poor state. A key problem was political instability resulting
from frequent changes of Government through votes of no confidence. Frequent restructuring and policy
reversals, ad-hoc decision making processes, unclear policy settings and weak development strategies all
contributed to a breakdown in the delivery of vital services such as health, education and infrastructure.
In 2001 the Mekere Government introduced OLIPACC to stabilise PNG politics by enhancing the role of
political parties in Parliament and at the same time providing a stable political climate. What ensued was
almost ten years of political stability under the National Alliance-led Government until the ruling in July 2010
by the PNG Supreme Court which nullified specific provisions of OLIPACC.
In the years following the inception of OLIPPAC, investor confidence soared and PNG experienced its longest
period of sustained high economic growth since independence. Although the exact impact of OLIPPAC is
subject to debate, there is no doubt it provided PNG with the foundations conducive for long term economic
growth and prosperity. In the same way, political stability has been essential for the periods of sustained
rapid growth achieved by many of PNG’s neighbouring countries in Asia including, Indonesia, Malaysia,
Singapore, Korea and China. Interruptions to political stability on the other hand undermine investor
confidence and economic growth.
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