KFMIC Report: Friday, 15 November 2013

PNG Macro Environment

The deficit budget for 2014 is expected to be tabled in the coming month with the deficit to grow by 5-6% of GDP increasing the overall debt to GDP level to ~35%. Whilst the current Government would espouse a “minimal deficit to grow the economy…”, spectators are wary of perennial “capacity constraints” that would mitigate the impact on economic growth from government spending. The recent fall in the PNG Kina will most likely flow through to increased inflation in 2014 and 2015. BPNG state they will continue their current stance on monetary policy due to the low inflation environment. BPNG project 2013 real economic growth will be 5.0% (less than the 6.1% predicted by Department of Treasury). KFM maintain our view that medium term economic growth will be lower than official predictions.

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