Papua New Guinea’s economic outlook stable: Moody’s


Papua New Guinea’s economic growth and low debt has pleased international credit rating agency Moody’s, although local businesses and financial institutions will be largely unaffected by its latest rating.

Moodys_logo_blueIn its latest outlook, Moody’s has maintained PNG’s B1 ‘stable’ rating, saying it was supported by robust growth and low public debt.

Noting the O’Neill Government’s development plan includes a wide fiscal deficit of 7.2% of GDP in 2013 and a tentative return to surplus by 2017, Moody’s ranks the political and economic risks as ‘low-to-moderate’.

‘Institutional strength remains a weakness, as highlighted by the inadequacies related to the effectiveness of governance, control of corruption, and the rule of law,’ says Moody’s analysis.

‘On the other hand, the government’s financial strength is moderate, supported by its low levels of debt, an improving debt structure, and the increasing reliance on domestic funding.

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‘But political risks have decreased following the strong leadership mandate received by Prime Minister Peter O’Neill’s coalition in parliamentary elections held in the middle of last year.’

‘Moody’s believes the outlook is stable,’ says David Lennox, analyst at Fat Prophets in Sydney. ‘Although there is some softening in the projects areas, it’s not enough to generate concern about the country’s finances going forward.’

Kina Securities Chief Executive Officer Syd Yates told Business Advantage PNG that the continuing B1 rating would have little effect unless local companies were borrowing offshore.

Rival ratings agency Standard and Poor’s own assessment of PNG is an equivalent B+ ‘stable’ rating. The third major ratings agency, Fitch’s, does not provide an assessment of PNG.