Economy of Papua New Guinea

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Economy of Papua New Guinea

Port Moresby

Currency kina (PGK)

Fiscal year calendar year

Trade APEC and WTO
organisations

Country group Developing/Emerging[1]

Lower-middle income economy[2]

Statistics

Population  9,949,437 (2021)[3]

GDP  $23.587 billion (nominal, 2019 est.)[4]

 $34.257 billion (PPP, 2019 est.)[4]

GDP rank 109th (nominal, 2019)

124th (PPP, 2019)

GDP growth −0.8% (2018) 6.0% (2019e)

−1.3% (2020f) 3.4% (2021f)[5]
GDP per capita   $2,742 (nominal, 2019 est.)[4]

  $3,983 (PPP, 2019 est.)[4]

GDP per capita 129th (nominal, 2019)
rank
145th (PPP, 2019)
GDP by sector agriculture: 22.1%

industry: 42.9%

services: 35%

(2017 est.)[6]
Inflation (CPI) 4.4% (2020 est.)[4]
Population 39.9% below poverty line (2009 est.)[7]
below poverty line
65.6% on less than $3.20/day (2009)[8]
Gini coefficient 41.9 medium (2009, World Bank)[9]
Human  0.555 medium (2019)[10] (155th)
Development Index
N/A IHDI (2018)[11]
Labour force  2,640,304 (2019)[12]

47.4% employment rate (2010)[13]

Labour force by agriculture: 85%
occupation
industry: NA%

services: NA%[6]

Unemployment  2.5% (2017 est.)[6]

Main industries Natural Gas extraction, palm oil processing, plywood

production, mining (gold, silver, copper); wood chip production;

crude oil and petroleum products; construction, tourism,

livestock (pork, poultry, cattle), dairy products, spice products

(turmeric, vanilla, ginger, cardamom, chili, pepper, citronella,

and nutmeg), fisheries products

Ease-of-doing-  120th (medium, 2020)[14]
business rank

External

Exports  $11 billion (2019 est.)[15]

Export goods Natural gas, gold, copper, lumber, crude petroleum, nickel, palm

oil, fish, coffee

Main export  Australia 26%
partners
 China 26%

 Japan 22%

 Taiwan 7%
 (2019)[16]

Imports  $1.876 billion (2017 est.)[6]

Import goods Refined petroleum, excavation machinery, crude petroleum,

foodstuffs, delivery trucks

Main import  Australia 33%
partners
 China 19%

 Singapore 14%

 Malaysia 9%

(2019)[16]
FDI stock  $4,194 Million (31 December 2017 est.)[17]

 Abroad: $473 Million (31 December 2017 est.)[17]

Current account  $4.859 billion (2017 est.)[6]
Gross external debt  $17.94 billion (31 December 2017 est.)[6]

Public finances
Public debt  36.9% of GDP (2017 est.)[6]
Budget balance −4.8% (of GDP) (2017 est.)[6]

Revenues 3.638 billion (2017 est.)[6]

Expenses 4.591 billion (2017 est.)[6]

Economic aid no data
Credit rating Standard & Poor's:[18]

BB- (Domestic)

B+ (Foreign)

BB (T&C Assessment)

Outlook: Stable[19]

Moody's:[19]

B2

Outlook: Stable
Foreign reserves  $1.735 billion (31 December 2017 est.)[6]

Main data source: CIA World Fact Book

All values, unless otherwise stated, are in US dollars.

The economy of Papua New Guinea (PNG) is largely underdeveloped with the vast

majority of the population living below the poverty line. [20] However, according to the
Asian Development Bank its GDP is expected to grow 3.4% in 2022 and 4.6% in 2023.
[21]
 It is dominated by the agricultural, forestry, and fishing sector and the minerals and
energy extraction sector. The agricultural, forestry, and fishing sector accounts for most
of the labour force of PNG while the minerals and energy extraction sector, including
gold, copper, oil and natural gas is responsible for most of the export earnings. [22][20]
 Main market in Goroka

PNG's GDP growth has been driven by the extraction industries and real GDP growth
per capita has averaged 4% since mid-2000.[23] The GDP Growth rate for PNG in 2021
was at 1.3%.[24] The country has made significant progress investing proceeds from oil
and gas in infrastructure building. As a result, its major cities like Port
Moresby and Lae have received increased international investor attention, giving rise to
an unprecedented building boom [25] to exploit the opportunities presented by the
country's rise as a regional economic leader in the South Pacific region. This is well
supported by its strategic location as a gateway from the Pacific to Asia, as well as its
comparatively huge landmass and demographic profile (almost 7 times that of the rest
of the smaller Pacific Island nations)
The International Monetary Fund has reported[26] that despite PNG's poverty, it is richly
endowed with natural resources, but exploitation has been hampered by the rugged
terrain and the high cost of developing infrastructure.[27] Agriculture provides a
subsistence livelihood for the bulk of the population. Mineral deposits,
including oil, copper, and gold, account for 72% of export earnings.
Budgetary support from Australia and development aid under World Bank auspices
continue to sustain the economy.[28] Australia is PNG's largest aid donor, and will provide
$479.2 million of aid in 2023.[29] In June 2021 the World Bank approved a US$100 million
(PGK 352 million equivalent) operation to support Papua New Guinea in its response to
COVID-19, and to lay important foundations for a sustainable recovery. [30]

Contents

 1Economy
 2Mineral resources
 3Agriculture, timber, and fish
 4Industry
 5Telecommunications
 6Energy
o 6.1Electricity
 6.1.1Access to electricity
 6.1.2Consumption
 6.1.3Generation
 6.1.4Transmission and distribution
 6.1.5Entities and institutions
 6.1.6Electricity generation by source
 6.1.7Renewable energy
 6.1.7.1Hydroelectric projects
 6.1.7.1.1Proposed projects
 7Transport
 8Finance
 9Trade and investment
 10Development programs and aid
 11Economic conditions
o 11.1Main indicators
 12Statistics
 13See also
 14References
 15External links

Economy[edit]
According to the Investment Promotion Authority of Papua New Guinea the major
economic sectors are agriculture and livestock, forestry, mining and petroleum, tourism
and hospitality, fisheries and marine resources, manufacturing, retailing and
wholesaling, building and construction, transport and telecommunications, and finance
and business trade.[24] The economy generally can be separated into subsistence and
market sectors, although the distinction is blurred by smallholder cash cropping of
coffee, cocoa, and copra. About 75% of the country's population relies primarily on the
subsistence economy. The minerals, timber, and fish sectors are dominated by foreign
investors. Manufacturing is limited, and the formal labour sector consequently also is
limited.[31]

Mineral resources[edit]
Main article: Mining in Papua New Guinea
In 1999, mineral production accounted for 26.3% of gross domestic product.
Government revenues and foreign exchange earning minerals. Copper and gold mines
are currently in production at Porgera, Ok Tedi, Misima, Lihir, Simberi[32] and Hidden
Valley.[33] As of 2014, talks of resuming mining operations in the Panguna mine have
also resurfaced, with the Autonomous Bougainville Government and National
Government of Papua New Guinea expressing interest in restarting mining operations in
the area.[34]
New nickel, copper and gold projects have been identified and are awaiting a rise in
commodity prices to begin development. At early 2011, there are confirmation
that Mount Suckling project has found at least two new large highly
prospective porphyry bodies at Araboro Creek and Ioleu Creek.[35] A consortium led
by Chevron is producing and exporting oil from the Southern Highlands Province of
Papua New Guinea. In 2001, it expects to begin the commercialization of the country's
estimated 640 km³ (23 trillion cubic feet) of natural gas reserves through the
construction of a gas pipeline from Papua New Guinea to Queensland, Australia. The
project was shelved.
In 2019, the country was the 8th largest world producer of cobalt,[36] and the 15th largest
world producer of gold.[37] In the production of silver, in 2017 the country produced 90
tons.[38]

Agriculture, timber, and fish[edit]

Main article: Agriculture in Papua New Guinea
The agricultural, forestry, and fishing sector accounts for most of the labour force of
PNG. Agriculture currently accounts for 25% of GDP and supports more than 80% of
the population. Most agriculture is subsistence, while cash crops are exported. The
main crops by value are coffee, oil, cocoa, copra, tea, rubber, and sugar. The timber
industry was not active in 1998, due to low world prices, but rebounded in 1999. About
40% of the country is covered with timber rich trees, and a domestic woodworking
industry has been slow to develop. Fish exports are confined primarily to shrimp,
although fishing boats of other nations catch tuna in Papua New Guinea waters under
license.
Papua New Guinea has the largest yam market in Asia.[39][40]
Papua New Guinea produced in 2018:

 2.4 million tons of palm oil (9th largest world producer);

 1.3 million tons of banana;
 1.2 million tons of coconut (7th largest world producer);
 1.1 million tons of fruits, fresh nes;
 728 thousand tons of sweet potato (17th largest world producer);
 375 thousand tons of yam;
 356 thousand tons of root and tubers;
 325 thousand tons of vegetable;
 271 thousand tons of taro;
 241 thousand tons of maize (green);
 237 thousand tons of sugar cane;
 152 thousand tons of cassava;
 107 thousand tons of berries nes;
 57 thousand tons of coffee;
 44 thousand tons of cocoa;
In addition to smaller productions of other agricultural products, like natural rubber (7.7
thousand tons) and tea (5.5 thousand tons).[41]

Industry[edit]
In general, the Papua New Guinea economy is highly dependent on imports for
manufactured goods. Its industrial sector—exclusive of mining—accounts for only 9% of
GDP and contributes little to exports. Small-scale industries produce beer, soap,
concrete products, clothing, paper products, matches, ice cream, canned meat, fruit
juices, furniture, plywood, and paint. The small domestic market, relatively high wages,
and high transport costs are constraints to industrial development.

Telecommunications[edit]
Until the second half of 2007, information and communication technology (ICT) services
in Papua New Guinea (PNG) were limited to urban centres under the monopoly
operator, Telikom PNG (Mitchel 2008). Thereafter, the Irish owned utility Digicel entered
the mobile market and expanded mobile signal coverage across the country enabling
connectivity to many people — the mobile phone penetration rate reached 41 per cent
by 2014, marking a substantial change in the communications landscape. [42] PNG has
42.68 mobile phone users per 100 population, estimated in 2017. [43] PNG has a low level
of broadband uptake, estimated in 2017 at 0.213 per 100 population. [44]

Energy[edit]
Particularly in rural areas there is reliance on traditional sources of biomass energy for
cooking.
Electricity[edit]
Access to electricity[edit]
By 2017, only 50.42% of the rural population had access to electricity. [45] 80.23% of the
urban population in 2017 had access to electricity. [46] Limitations in the transmission and
distribution infrastructure lead to frequent outages in urban centers. [47]
Consumption[edit]
Electricity - consumption: 3.116 billion kWh (2012 est.) [48]
Generation[edit]
Electricity - production: 3.35 billion kWh (2012 est.) [48]
Transmission and distribution[edit]
PNG Power Ltd (PPL) operates three separate grids. There are two main large grids,
the Port Moresby system serving the National Capital District and the large Ramu grid
that extends into the highlands. Also, PPL operates the small Gazelle Peninsula Grid
powered mainly by a 10 MW run-of-river hydro plant. [49]
Entities and institutions[edit]
The Electricity Commission (ELCOM) was privatised with the passage of the Electricity
Commission (Privatization) Act 2002. PNG Power Limited (PPL) is a vertically
integrated utility responsible for generation, transmission, distribution and retailing of
electricity throughout Papua New Guinea.
Electricity generation by source[edit]
Renewable energy[edit]
A study by Bloomberg New Energy Finance ranked PNG in the top 10 for potential
renewable resources, with about 2.5 GW of these but only 2% of it exploited. [50]
Hydroelectric projects[edit]
The Yonki Dam project, which commenced operation in 1991, on the Ramu River has
generation capacity of 77 MW (103,000 hp) (Ramu 1) plus proposed additional capacity
of 18 MW.
Proposed projects[edit]
The list of intended projects include the US$2 billion Ramu 2 hydro project on the Ramu
River to be built under a public-private partnership with Shenzen Energy Group. [51]
Edevu Dam is to be constructed by PNG Hydro Development Ltd (PNGHDL) to
generate 50 Megawatts (MW).[52]
Consultants to PNG Power have conducted feasibility studies for the Naoro Brown
hydroelectricity Project which would supply up to 80MW of electricity to the Port
Moresby grid.[53]

Transport[edit]
Main article: Transport in Papua New Guinea
Transport in Papua New Guinea is in many cases heavily limited by the mountainous
terrain. The capital, Port Moresby, is not linked by road to any of the other major towns
and many highland villages can only be reached by light aircraft or on foot.
Papua New Guinea has no major railways, but some mine sites have disused tracks.
The country has 10,940 km (6,800 mi) of waterways, and commercial port facilities
at Port Moresby, Alotau, Oro
Bay, Lae, Kimbe, Kieta Madang, Buka, Rabaul/Kokopo, Kiunga, Wewak and Vanimo.[54]

Finance[edit]
The Bank of Papua New Guinea (BPNG) is the central bank of Papua New Guinea. Its
main function is to issue currency and to act as the banker and financial agent to the
Government. It is also in charge of regulating banking and other financial services and
manages the gold, foreign exchange and any other international reserves of Papua New
Guinea.
BPNG is engaged in developing policies to promote financial inclusion and is a member
of the Alliance for Financial Inclusion, which had been formed in 2008. In 2013, BPNG
made a Maya Declaration Commitment[55] to create an enabling environment for building
an inclusive financial sector in Papua New Guinea. [56]
The currency of Papua New Guinean, issued by the BPNG, is the kina, which was
introduced on 19 April 1975 to replace the Australian dollar.

Trade and investment[edit]

In 2014, Papua New Guinea's merchandise exports were:

 41% fuels and mining;

 23.8% agriculture;
 6.2% manufacturing; and
 29% other.[57]
Major destinations for merchandise exports include Australia (39.9%), the European
Union (20.2%), Japan (11.7%), China (6.7%), and Singapore (5.6%).
In 2014, Papua New Guinea's merchandise imports were:

 17.8% fuels and mining;

 11.4% agriculture;
 69.4% manufacturing; and
 1.4% other.[57]
Major source countries for merchandise imports include Australia (34.4%), Singapore
(14.3%), the European Union (8.3%), China (6.9%), and Japan (6.4%).
Petroleum, mining machinery and aircraft have been the primary U.S. exports to Papua
New Guinea. In 1999, as mineral exploration and new minerals investments declined,
as did United States exports. Crude oil is the largest U.S. import from Papua New
Guinea, followed by gold, cocoa, coffee, and copper ore.
U.S. companies are active in developing Papua New Guinea's mining and petroleum
sectors. Chevron operates the Kutubu and Gobe oil projects and is developing its
natural gas reserves. A 5,000–6,000 m³ (30,000–40,000 barrel) per day oil refinery
project in which there is an American interest also is under development in Port
Moresby.
In 1993, Papua New Guinea became a participating economy in the Asia-Pacific
Economic Cooperation (APEC) Forum. In 1996, it joined the World Trade
Organization (WTO).

Development programs and aid[edit]

Papua New Guinea is highly dependent on foreign aid. Australia has been the largest
bilateral aid donor to PNG, providing $A506 million ($US376 million) in 2016.
[58]
 Budgetary support, which has been provided in decreasing amounts since
independence, was phased out in 2000, with aid concentrated on project development.
Other major aid sources to Papua New Guinea are Japan, the European Union, the
People's Republic of China, the Republic of China, the United Nations, the Asian
Development Bank, the International Monetary Fund, and the World Bank. Volunteers
from a number of countries, including the United States, and mission church workers
also provide education, health, and development assistance throughout the country.

Economic conditions[edit]
By mid-1999, Papua New Guinea's economy was in crisis. Although its agricultural
sector had recovered from the 1997 drought and timber prices were rising as most
Asian economies recovered from their 1998 slump, Papua New Guinea's foreign
currency earnings suffered from low world mineral and petroleum prices. Estimates of
minerals in exploration expenditure in 1999 were one-third of what was spent in 1997.
The resulting lower foreign exchange earnings, capital flight, and general government
mismanagement resulted in a precipitous drop in the value of Papua New Guinea's
currency, the kina, leading to a dangerous decrease in foreign currency reserves. The
kina has floated since 1994. Economic activity decreased in most sectors; imports of all
kinds shrunk; and inflation, which had been over 21% in 1998, slowed to an estimated
annual rate of 8% in 1999.
Citing the previous government's failure to successfully negotiate acceptable
commercial loans or bond sales to cover its budget deficit, the government formed
by Sir Mekere Morauta in July 1999 successfully requested emergency assistance from
the International Monetary Fund and the World Bank. With assistance from the Fund
and the Bank, the government has made considerable progress toward macroeconomic
stabilization and economic reform.
As of 2019, although statistics show that an economic recovery is underway, Papua
New Guinea's economy is still struggling.
Main indicators[edit]
The following table shows the main economic indicators in 1980–2017. [59]

198 19 199 199 200 20 20 20 200 20 201 20 20 20 20 20 20 20

Year
0 85 0 5 0 05 06 07 8 09 0 11 12 13 14 15 16 17

3.1 4.4 5.4 9.3 10. 13. 13. 15. 16. 17. 19. 19. 21. 22. 25. 28. 29. 30.
GDP 6 1 9 4 55 18 90 85 11 34 33 95 26 43 69 04 08 33
in $ Bln Bl Bln Bln Bln Bl Bl Bln Bln Bl Bln Bl Bl Bl Bln Bl Bl Bl
(PPP)
. n. . . . n. n. . . n. . n. n. n. . n. n. n.

GDP 1,0 1,3 1,4 2,0 2,0 2,2 2,3 2,3 2,6 2,6 2,8 2,8 2,8 2,9 3,3 3,5 3,5 3,6
per 67 23 62 67 56 80 48 48 17 00 91 30 61 54 13 40 97 75
capita
in $
 (PPP)

GDP −2. 3.6 −3. −3. −2. 3.9 2.3 11. −0. 6.8 10. 1.1 4.6 3.8 12. 9.0 2.4 2.5
growth 3% % 0% 4% 5% % % 1% 3% % 1% % % % 5% % % %
(real)

Inflati
on 12. 3.7 7.0 17. 15. 1.8 2.4 0.9 10. 6.9 5.1 4.4 4.5 5.0 5.2 6.0 6.7 5.2
(in 1% % % 3% 6% % % % 8% % % % % % % % % %
Percent)

Gover
nment
debt 36 42 32 26 23 22 22 17 16 19 25 27 29 32 33
... ... ...
(Percent % % % % % % % % % % % % % % %
age of
GDP)

Statistics[edit]
Household income or consumption by percentage share:
lowest 10%: 4.3%
highest 10%: 36% (2008)
Labour force: 2.078 million
Electricity – production: 2,200 GWh (2008)
Electricity – production by source:
fossil fuel: 67.78%
hydro: 32.22%
nuclear: 0%
other: 0% (2008)
Electricity – consumption: 2,000 GWh (2008)
Electricity exports: 10 kWh (2008)
Electricity – imports: 0 kWh (2008)
Agriculture – products: coffee, cocoa, coconuts, palm kernels, tea, rubber, sweet
potatoes, fruit, vegetables; poultry, pork, vanilla
Currency: 1 kina (K) = 100 toea
Exchange rates: kina (K) per US$1 – 3.14 (April 2016), 2.7624 (November 1999),
2.520 (1999), 2.058 (1998), 1.434 (1997), 1.318 (1996), 1.276 (1995)
 See also[edit]
 New Guinea portal

 COVID-19 pandemic in Papua New Guinea