By FRANCIS RODNEY PULU
TREASURER Ian Ling-Stuckey has told Parliament on Thursday that the domestic situation on the economy appears to have improved but the economic international situation is getting worse with key countries likely to head into recession.
– Picture by FRANCIS RODNEY PULU
Ling-Stuckey said with this situation it will be more difficult for the 2023 budget.
He told Parliament that as an understanding of this international pressures it can help the MPs to prepare and consider the 2023 budget in the next Parliament session.
“In my statement to Parliament in August, I noted that the outlook for the global economy had moved to gloomy and more uncertain and unfortunately the global economic outlook has become much worse over the last two months,” he said.
Ling-Stuckey said the international changes are well beyond control of a country such as PNG, where the economy accounts for just 0.03 %.
He said PNG’s economy will be buffed by these winds of the global economy in the same way as the small raft in a huge storm.
“Many now expect that major economics will move back into a global recession and the International Monetary Fund (IMF) released their update outlook for the global economy on Wednesday.
“Let me share a few quotes from the IMF Chief economist: ‘The three largest economies of US, Europe and China will continue to stall and for many people, 2023 will feel like recession and then the worst is yet to come’,” he said.
Ling-Stuckey added that there are three main reasons for this depressing international news. First is the ongoing supply chain shortages stemming from the COVID-19 especially the lockdown in China. The second is the ongoing and troubling Ukraine-Russian war. And thirdly the economic threat on global inflation.
Ling-Stuckey said the Central Banks around the world are rapidly increasing their interest rates.
“For example, the US inflation has increased from 1.3% in 2020 to current estimates of 8.2% and in response the US Federal Reserve has lifted interest rates from 0% to 3% and further increases are considered likely until the US prices started falling in response to the economy slowing down even it means the US is going into recession,” he said.
He said this will have a significant implication for PNG.
“First our export markets will be affected and there will be less opportunities for our coffee, cocoa in the US market. Second our international interest cost will increase putting pressure on our budget. And thirdly and economic slowdown will downward pressure on oil prices despite a small bounce in recent weeks where the WTI crude oil is lower at the time of the Russia’s invasion of Ukraine and the oil future say it will fall further,” he said.
Ling-Stuckey added that while a fall in the oil prices is good for many PNG families it will also mean less resource revenues for the 2023 budget.
“As we designed the 2022 Supplementary Budget with nearly K1.2 billion in additional expenditures we understood that the boom in oil revenues was going to be temporary. We did not want to repeat the tragic budgetary mistakes of the 2014 spending big before revenues were received,” he said.
Meanwhile, he said the Marape-Rosso Government is a transparent Government and wants to inform the people of the economic developments.
