Why PNG's GDP will grow by more than 4 per cent

The report does make a case about how bad the recent past has been. GDP declined in all but 2 of the years from 1995 to 2002 while per capita income fell 18 per cent compared with gains of 50 per cent for Samoa and 30 per cent for Fiji. Nevertheless PNG's economic turnaround since 2002 has been dramatic in terms of the strengthening of the kina, a sharp decline in the ratio of public sector debt to GDP, sharply reduced inflation and modest economic growth.

Treasurer Bart Philemon has predicted the economy will grow by 2.9 per cent next year but I think this will be a gross under-estimation.

If the Econet deal had gone through, economic growth would have comfortably topped the 5 per cent mark, due to the injection of K150 million in capital works and a solid upturn in sectoral employment. But even without Econet, current projections are extremely conservative although the government has adopted fairly "safe" price projections for oil at US$35 a barrel and gold at US$400 an ounce.

Among the factors that will provide a stronger than anticipated growth will be the first full year of production and exports from the Napa Napa oil refinery, the start of gold production at Kainantu and new development spending and production from the North West Moran and SE Manada oilfields. Something like K800 million will also be spent on construction of the Hidden Valley gold project in Morobe.

There will be some limited spin-off benefits from spending linked to Australia's Enhanced Co-operation Program, as well as locally conducted work on front end engineering and design for the gas project. There will be further increases in exploration spending both for minerals and oil spread across several provinces.

In short, the spurt in economic activity will largely be due to an upturn in resource activities but this will have the capacity to underpin long-term growth. There will be no major new investments in the agricultural sector because incentives that have been announced are unrealistic although they could provide benefits to large companies in the areas of research and extension work.

While GDP growth should approach the 5 per cent level next year, the period from 2006 to 2010 could see this rise further to around 7 to 10 per cent due to the gas project, new mines, increased construction activity as well as an increasingly robust fisheries sector.

Confidence in such a robust outcome is underpinned by the work now being undertaken by Treasury to open district treasuries that will be responsible for making out government cheques to officials in 89 districts throughout the country. Each of these centres will also provide banking services to the neighbouring population with the increased deposit base for Bank South Pacific likely to encourage the bank to adopt even more aggressive lending policies.

I have to admit to very questionable skills as a forecaster and will have to be totally apologetic to Mr Coppell if growth next year is closer to the 1 per cent mark rather than 4-5 per cent. But we live in hope.