The overall balance of payments is projected to remain in deficit in 2014 according to the 2014 Bank of Papua New Guinea annual report.
Balance of payment records all of a country’s economic transactions with the rest of the world over a period of one year. A favorable balance of payments exists when more payments are coming in than going out.
The latest estimate for growth in real Gross Domestic Product (GDP) by BPNG in its 2014 annual report shows that the economy expanded at a slower pace than the National Budget forecast of 5.1 percent.
The Bank projects a growth of 4.4 percent in 2014, lower than the Budget forecast of 6.2 percent.
This growth is expected to be supported by the production and export of liquefied natural gas and Government’s fiscal stimulus.
The Bank forecasts a higher annual inflation rate of 6.5 percent in 2014, reflecting imported inflation and some pass-through of the kina depreciation reported earlier on by PNG Loop.
“The overall balance of payments is projected to remain in deficit in 2014 by K1, 143 million, reflecting higher imports, net service and income payments.
“By the end of the year, the gross foreign exchange reserves are projected to be around US$2,785.5 (K6,744.6) million, sufficient for 5.3 months of total and 9.7 months of non-mineral import covers” the report says.
Broad money supply is expected to increase by 7.2 percent in 2014, driven mainly by an increase in the net domestic assets of the banking system, reflecting increases in net credit to Government and the private sector.
The report says that the 2014 National Budget continues on the fiscal stimulus path started in 2013 to support economic growth in light of the winding down of construction of the PNG LNG project.