PNG Macro Environment
Domestic economic growth continues to be subdued. The economy continues to weather the impacts of low global commodity prices which have impacted government revenues.
Foreign currency shortages are an additional headwind with those businesses reliant on imported inputs finding the short supply of foreign currency impacting domestic operations. Domestic consumption spending remains under pressure. KFM continues to believe that GDP growth will remain subdued relative to recent history. The upcoming PNG National Election may assist in boosting growth for a period however overall KFM believe that will be against a backdrop of factors that keep growth subdued for the medium term. Furthermore, the ongoing depreciation of the PNG Kina against the US dollar supports our view that inflation will increase to over 6.6% in the next 6 to 12 months with potential to move above 7% as the lagged effects of recent depreciation are felt.
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