THE 2017 Papua New Guinea budget was a missed opportunity for restoring credibility in economic management.
The government should have a strong understanding of past and future drivers of growth in the economy. This means being able to measure the economy’s size as accurately and consistently as possible.
Unfortunately, the 2017 budget is internally inconsistent and tells very mixed stories.
This matters, as budgets are a key measuring stick for assessing government performance. GDP figures are also important in determining whether PNG is meeting certain statutory requirements, such as keeping its debt levels low.
Vastly different measures for GDP were included throughout the same budget document – not a good look for international investors and credit ratings agencies.
There are other forecasting problems. For example, the budget assumes liquefied natural gas values will increase by 16% but recent World Bank forecasts indicate they will fall by 35%.
Also, using official Bank of PNG figures and updating them for the lower growth forecasts in the 2017 budget, a recession can be confirmed as can a fall of 8% in average living standards since 2013.
According to official estimates, it will now take until at least 2023 for PNG to get back to its 2013 standard of living.
So Papua New Guinea is facing another lost decade of development.
Economic management is not going well.