Growth Rates
Papua New Guinea (PNG) is projected to experience notable economic growth in the coming years, with an expected increase of 3.3% in 2024 and 4.6% in 2025. This positive outlook is primarily driven by the resumption of operations at the Porgera gold mine, which has historically been a significant contributor to the country’s economy according to the Asian Development Bank and Word Bank.
The reopening of this mine, along with other mining sector improvements, is anticipated to stimulate not only direct economic activity but also ancillary benefits across various sectors, including services and local businesses.
The Asian Development Bank (ADB) notes that while growth was sluggish at 2.0% in 2023, largely due to decreased production in the resource sector, the medium-term outlook remains optimistic. The anticipated rise in GDP is expected to be supported by increased operational spending related to mining activities, which will also enhance foreign exchange inflows crucial for the economy.
The PNG Prime Minister James Marape announced in August 2024 that the country’s economic outlook is showing significant improvement, driven by stronger growth, low and stable inflation, and a substantial easing of foreign exchange (FX) shortages.
“The PNG economy is on a positive trajectory, with inflation persistently remaining below the historical average of 5.5 percent, and even lower than global averages— demonstrating the government’s strong commitment to price stability,” Prime Minister Jame Marape stated.
Sector Contributions
The projected economic growth reflects a shift from PNG’s traditional reliance on resource-based industries towards a more diversified economy. While the mining sector will continue to play a pivotal role, particularly with the Porgera gold mine’s reopening, there are indications that other sectors are beginning to gain traction:
- Mining Sector: The mining industry remains the backbone of PNG’s economy, contributing significantly to GDP and employment. The full-year impact of the Porgera mine’s operations is expected to boost overall economic performance and create additional job opportunities according to World Bank
- Agriculture: There is a growing emphasis on agriculture as a vital sector for diversification. The government is looking to enhance agricultural productivity and sustainability, which could lead to increased exports and improved food security.
- Services Sector: The services sector is anticipated to grow as infrastructure improvements and foreign investments facilitate better business environments. Enhanced services can contribute significantly to GDP growth by supporting both local consumption and export activities.
- Tourism: Although still recovering from pandemic-related setbacks, tourism presents an opportunity for economic diversification. Efforts to promote PNG’s unique cultural and natural attractions could increase visitor numbers and associated economic benefits.
Challenges and Considerations
Despite these positive projections, several challenges remain that could impact PNG’s economic trajectory:
- Foreign Exchange Constraints: Ongoing foreign exchange shortages have been a significant barrier for businesses operating in PNG. While improvements have been noted, sustained efforts are needed to stabilize the FX market and ensure adequate liquidity for essential imports as noted by ADB and PMNEC reports.
- Infrastructure Deficiencies: Infrastructure challenges continue to hinder economic growth. Investments in roads, ports, and energy supply are critical for facilitating trade and improving business operations across sectors according to BSP Group
- Political Stability: Recent civil unrest has raised concerns about political stability, which can deter investment and disrupt economic activities. Addressing law and order issues will be essential for maintaining investor confidence in ADB and BSP reports
Papua New Guinea’s economic outlook for 2024 and 2025 appears promising, driven by key developments in the mining sector and a gradual diversification into agriculture and services. However, pressing challenges such as foreign exchange constraints, infrastructure needs, and political stability remain to be addressed to sustain this growth trajectory.
