The PNG National Statistics Office (NSO) has finally confirmed that PNG suffered from a major recession in 2015. A recession is when the key parts of the economy which support PNG living standards go backwards. A recession is when there is less money for parents to look after their family. In 2015, the key parts of the economy went backwards in total by an extraordinary 4.1%. The poor growth performance continued into 2016 with just a 1.5% outcome. Combined with population growth of 3.1% pa, this meant incomes per person fell by nearly one-tenth in just two years. This was an awful truth that PNC Treasurer Abel has been trying to suppress. Some industries declined by nearly one-fifth in just one year (18.2% for some). This was the worst economic outcome for more than a decade. Our people deserve a better government to deliver better outcomes” stated the Shadow Minister for Treasury and Finance, Ian Ling-Stuckey.

“The PNG NSO released last Wednesday the official GDP figures for 2015. This was after an extraordinary delay of nearly a year since the preliminary 2015 data was released, and then suppressed. Treasurer Abel and his Secretary Dairi Vele have told many lies since, about hiding the official details for 2015. There were stories about changes in price indexes that were the cause for the delay – but price indexes were not the issue. A clever trick has been found to boost the size of the gas sector in 2015, but just a little digging shows how the true economic story has been disastrous – going backwards into a severe recession of minus 4.1%. Every sensible commentator knew the O’Neill/Abel government story that “things were fine” just didn’t add up. The Prime Minister was playing “big man” at the South Pacific Games extravaganza while the rest of the country suffered. Businesses were reporting major falls in sales, employment was falling, tax indicators were falling, imports were falling” stated the Shadow Treasurer.

“Part of the economic decline was caused by not planning for the boom and bust cycle of a single large gas project, part was the frosts and drought, but a major part was additional economic mismanagement. This economic management included appalling foreign exchange policy (foreign exchange shortages crippling businesses), poor budget policy (massive blow-outs in debt and mismanagement) and lax business policy (basking in the Pacific Games and ignoring the hard yards of making a better economy such as supporting SMEs).

“The economic harm of the PNC is finally being revealed. After allowing for inflation, the NSO now says the size of the non-resource economy in 2016 is K41,729 million, over one billion smaller than the size of the economy in 2014 of K42,921 million. We need an urgent change of leadership for the sake of the people of PNG. The Alternative Government is ready with better policies for growth and jobs, lower cost of living and a more inclusive society” said Mr Ling-Stuckey.

 

Hon.Ian Ling-Stuckey,CMG.MP
Shadow Minister for Treasury & Finance

15 April 2019

Details

 

Gross Domestic Product (GDP) is an attempt to measure the size of the economy and determine changes through time. The PNG National Statistics Office had stopped producing GDP estimates from 2006. With international support, updated numbers for 2006 to 2014 were finally released in 2017. In early 2018, preliminary figures were produced for 2015, and figures for 2016 were expected soon afterwards. However, the government did not like the new NSO estimates and tried to suppress them. The latest budget indicated that there was an issue with the price indexes – but the same price index method had been used for the first release covering 2006 to 2014 and the government liked the earlier numbers.

PNG is known as a “dualistic” or two part economy. There is the resource part which covers the mining, oil and gas sectors. This resource part of the economy is primarily foreign owned. The resource sector impacts on the rest of the economy through some jobs (only 0.4% of employment), some local contracts, and theoretically through taxes and dividends. Of course, in recent years, there hasn’t been much in the resources taxes and dividends. When these taxes are spent, they show through as part of the non-resource economy (such as construction for roads projects and salaries for teachers and public servants). So the key to understanding how the economy is performing for the people of PNG is to examine the non-resource economy. This used to be done by the NSO. However, they have not provided these key figures for this release – possibly due to political pressure.

However, it is easy to derive these figures. Table 8 of the NSO release provides figures by industry for constant price (after inflation) GDP. The resource sector is covered by line B of those tables – described as “Mining and Quarrying – Total”. One can simply subtract this resource sector line from the overall GDP line to get the non-resource GDP estimates. This is done in the table below. From this, real growth rates can be calculated for the two parts of the economy, as well as the total growth. This is shown in the graph below for the years 2013 to 2016. Clearly, the boom in the gas sector is dominating the PNG growth story. However, what matters for the people of PNG is the non-resource growth path. This has been extremely disappointing, especially in 2015 and 2016 with figures of minus 4.1% and then only 1.5%.

Figures derived from PNG NSO Table 8 page 17