Economic update: cautious optimism in Papua New Guinea as major projects take shape


With major new resources projects still in play, and new players entering the market, this election year will be one to watch in Papua New Guinea. Business Advantage PNG talks to the country’s business leaders about the year ahead.

The fertile Markham Valley in Morobe Province has enormous potential as a centre for agribusiness. Credit: IFC

In 2020, PNG’s economy struggled under the triple challenges of political uncertainty, economic contraction and COVID-19. 2021 was a more stable year politically, while PNG developed its own way of handling the pandemic, with business returning to a ‘new normal’ or niupela pasin.

While the country experienced modest GDP growth in 2021, led by its non-resources sectors, the underlying economic challenges faced by the country, which pre-date COVID-19, have not disappeared. Government debt is now at record levels, while there has been no employment growth in the formal sector for several years.

On the surface, therefore, GDP growth predictions for 2022 of around four per cent (World Bank and Asian Development Bank) and 5.4 per cent (PNG Treasury) would seem very encouraging.

However, the government’s own projected 5.4 per cent growth for 2022 is considered by some in business as a slightly optimistic. Douveri Henao, Executive Director at the Business Council of PNG, explains why.

‘A lot of that [expected growth] is coming from the mining sector,’ he observes. ‘So, a restart of the Porgera [gold mine] has got a lot to do with it.’

The Porgera gold mine, PNG’s largest, has been in ‘care and maintenance’ mode for two years while the PNG Government has negotiated a new special mining lease with its operator, Barrick Niugini.

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A ‘commencement agreement’ has been signed by all parties but, at the time of writing, more work was required for the mine to actually reopen (targeted for the first half of 2022), let alone recommence production.

Any major delays will impact GDP growth projections, so there is plenty at stake.

On the plus side, higher-than-expected oil and gas prices, due to the global bounceback from COVID-19, supply constraints and war in the Ukraine, may well provide a revenue windfall for PNG, while also putting upward pressure on inflation.


While some in business were advocating for PNG’s budget deficit to be tackled, Treasurer Ian Ling-Stuckey instead announced a 2022 National Budget contain billion (US$6.3 billion) of spending – a record.

The government plans to invest more money in infrastructure, health and education, with a major boost for spending on the Connect PNG roads program, and more funds to upgrade the country’s ports and electricity system. Much of the infrastructure spend is being supported by countries such as the United States, Australia, Japan and New Zealand, and multilateral lending agencies.

‘One of the reasons lenders are providing a lot of support to the PNG government is because they can see the potential for the economy going forward,’ notes ANZ’s Pacific Economist, Kishti Sen.

‘Debt as the proportion of GDP is still under 52 per cent, well below the legislated limit of 60 per cent. And 52 per cent for a developing country like PNG is not even close to the median for similarly rated countries.’

Business is already feeling the benefits of the government’s expanded Public Investment Program.

‘There will be funds spent – you’ll see part of the economy having a lift in expenditure as people move through that election process – it will also be distraction from productivity in certain businesses.’

‘It’s a very exciting time in the civil construction space,’ observes George Constantinou, Managing Director of Hebou Constructions, which is currently involved in the reconstruction of the port at Motukea Island and a major upgrade of Lae’s Nadzab Airport.

‘The infrastructure spending has been quite healthy, with the Connect PNG rollout and the upgrade of PNG’s ports. Those two rollouts will be quite important for the next 20 years.’

National elections

Nambawan Super

Work commenced on Nambawan Super’s new headquarters in Waigani last year. Credit: Nambawan Super

PNG’s five-year electoral cycle means the current government led by Prime Minister James Marape must face the voters in June 2022 to obtain a mandate for its ‘Take Back PNG’ agenda, which has the aim of obtaining a better return from the nation’s resources for local interests.

While an incumbent government does have significant advantages in an election year, sources are predicting a concerted challenge this time from the People’s National Congress party led by former Prime Minister Peter O’Neill, whom Marape replaced mid-term in 2019.

Given PNG governments tend to be coalitions of several political parties, it would be a brave person to predict the result.

What can be expected, however, is a short-term stimulating K22.1 to the economy mid-year driven by election-related spending and the need to disburse government funding before it enters caretaker mode. Government activity as a whole, however, is expected to slow in the second quarter of 2022.

‘Whilst there will be funds spent – you’ll see part of the economy having a lift in expenditure as people move through that election process – it will also be distraction from productivity in certain businesses,’ predicts Paul Sayer, Chief Executive Officer of the country’s largest superannuation fund, Nambawan Super.

Strong performers

PNG’s growing population (increasing by two per cent annually) ensures that there is a growing domestic demand for many staples, regardless of macroeconomic factors.

‘Some of our food producers had a massively strong back end to 2021 and are forecasting strong budgets for 2022,’ notes John Byrne, President of the Chamber of Commerce in PNG’s second biggest city, Lae.

Global supply chain issues during the COVID pandemic have encouraged the trend for more goods to be manufactured and sourced locally.

On the downside, the increased cost of international freight, combined with an increase in local port-related fees, has also created a challenge for the country’s manufacturers.

‘The ability of people to absorb costs has come to an end,’ notes Chey Scovell, CEO of the Manufacturers Council of PNG, who tells Business Advantage PNG that he expects costs will start to be passed on to end-users this year.

‘I think 2022 will be another tough year, but from 2023, we should hopefully see some early works on these big projects.’

While the government has a deal to reopen the Porgera mine, and there are hopes for progress in several other major resources projects, experienced PNG business people are not budgeting for it.

‘By and large, most people have strapped themselves in for another quiet year,’ says Scovell.

‘The situation is absolutely challenging, there’s no question of that. But companies and people here are very resilient,’ observes Mark Baker, who is President of the Australia Papua New Guinea Business Council and heads the PNG operations of Australian bank ANZ.

A quieter year is also reflected in flat bank lending figures.

Major projects

How P’nyang connects to PNG’s two larger gas projects, PNG and Papua LNG. Credit: ExxonMobil

Let’s look a little closer at those major resources projects.

Together, they have the potential to inject billions of dollars into PNG’s economy over the next decade.

The largest and most advanced of these is the $US10 billion TotalEnergies-led Papua LNG gas project.

With a gas agreement and enabling legislation in place, Papua LNG is expected to go into its front-end engineering and design (FEED) stage in June 2022, with a final investment decision likely by the end of 2023. This decision will trigger a four-year construction phase, during which the project will be connected to the downstream facilities of ExxonMobil’s existing PNG LNG project.

‘We’ll have eight years of construction at least here in Moresby and Gulf Province. The whole country will get a huge uplift once all those [projects] get going.’

ExxonMobil’s next LNG project. P’nyang, is expected to start construction as soon as Papua LNG is complete. A gas agreement was signed for the project in February 2022.

Gulf and Western, two of PNG’s least-developed provinces, will benefit from these new projects, with new port, road, telecommunications and aviation infrastructure, and a special economic zone at Ihu in Gulf.

‘Basically, we’ll have eight years of construction at least here in Moresby and Gulf Province. The whole country will get a huge uplift once all those get going,’ enthuses Rio Fiocco, President of the Port Moresby Chamber of Commerce and Industry.

Another project for which there are high hopes is the Wafi-Golpu copper-gold project in Morobe Province. Legal issues have stalled progress but PNG’s Minerals Resources Authority has made Wafi and Porgera its twin priorities for 2022.

Meanwhile, the prospects of the giant Panguna coppermine on Bougainville reopening after 35 years were boosted in early 2022, when the Autonomous Bougainville Government and landowners agreed the mine should reopen.

Cautiously optimistic

ANZ’s Mark Baker.

ANZ’s Baker was one of several business leaders who said they were ‘cautiously optimistic’ about the resources-led stimulus to the economy in coming years, although 2022 may be too soon.

‘We are getting closer to PNG LNG being fully paid off, so that’s comforting, and you’re seeing high prices in oil, which should be helping the economy somewhat. But I don’t think 2022 is going to be a boom year,’ Nambawan Super’s Paul Sayer tells Business Advantage PNG.

‘I think 2022 will be another tough year, but from 2023, we should hopefully see some early works on these big projects and by 2024, we should see one or two of these big capex projects get going,’ says Rio Fiocco. ‘The future’s looking bright.’

The prospect is giving confidence to domestic investors. ‘We see that the fundamentals of PNG as a market are very strong,’ says Rupert Bray, Managing Director of Steamships Trading Company, a conglomerate with property, hospitality, and logistics interests.

‘We are in investment and expansion mode after a period of consolidation. Our shareholders are encouraging us to carefully consider sensible long-term investment opportunities.’

The article ‘Cautious optimism as major projects take shape’ was first published in the 2022 annual print edition of Business Advantage Papua New Guinea, the PNG’s premier business and investment guide. To get a digital copy, click here.

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