世界发展银行-Papua-New-Guinea-Economic-Update,-January-2021---Dealing-with-a-Triple-Crisis_94页_4mb

Summary of Papua New Guinea Economic Update: Dealing with a Triple Crisis

Core Content

This report, Dealing with a Triple Crisis, is the sixth in the series of Papua New Guinea Economic Updates (PNG EU). It analyzes the economic challenges faced by PNG in 2020, including the COVID-19 health emergency, economic contraction, and political turmoil. The report also provides a special focus on institutional capital for public service delivery, emphasizing the need for strengthening institutions to ensure effective service provision.

Main Economic Developments

1. Economic Growth

• The global pandemic led to a global recession, with the World Bank estimating a 4.3% contraction in global GDP in 2020.
• PNG's real GDP contracted by 3.8% in 2020, below pre-crisis projections of 2.9% growth.
• The non-resource economy also experienced a contraction, with a 0.2% decline in non-resource GDP in 2020, marking the first significant contraction since 2015.
• Resource sector contraction was more severe, with gold, copper, palm oil, timber, and coffee production all declining, while LNG and crude oil prices fell significantly.
• The Porgera gold mine closure had a 1.5 percentage point impact on GDP in 2020, and its reopening could lead to a rebound in government revenues.

2. Fiscal Developments

• The fiscal deficit widened to 8.1% of GDP in 2020, 3 percentage points higher than pre-crisis projections.
• Public debt surged to 49% of GDP, up from 35.9% in 2017.
• Government revenue fell by 3.3% year on year in the first half of 2020, with tax revenue declining by 0.2%.
• Cash constraints limited the implementation of health and economic relief measures, as domestic revenue was reduced and external support was delayed.

3. Monetary Policy and Price Developments

• Consumer price inflation rose due to imported inflation and currency depreciation.
• LNG prices dropped significantly in 2020, from US$9.40/MMBtu to US$4.20/MMBtu, but this had limited fiscal impact due to the relatively small contribution of LNG to government revenue.
• Monetary policy was constrained by limited domestic revenue and delayed external support.

4. External Sector

• International trade was the main transmission channel for the pandemic's economic impact.
• Main trading partners (Australia, China, Japan) experienced slower GDP growth, which negatively affected PNG's commodity-based export basket.
• Current account balance was 23.8% of GDP in 2020, but is expected to decline to 14.5% in 2021 due to lower export revenues.

Outlook and Risks

• Economic growth is expected to rebound to 3.5% in 2021-22, but the economy will be 9% smaller in 2023 than the pre-pandemic forecast.
• Risks to the outlook are downward-biased, including the prolonged impact of the pandemic and ongoing political instability.
• Fiscal consolidation and macroeconomic management will be critical for long-term stability.
• Strengthening key institutions that deliver basic services is essential, especially during crises.

Special Focus: Institutional Capital for Public Service Delivery

1. What is Institutional Capital?

• Institutional capital refers to the capabilities of institutions to deliver services, including rules, roles, and resources.
• It is particularly important in PNG, where social identities are small-scale and political systems are dominated by patron-client relationships.
• The report examines institutions that deliver basic services (village courts, education, health, roads) and those that collect public revenue.

2. Institutional Capital Stocktaking

• Basic order and justice: Weak institutional capacity in urban areas and lack of female magistrates.
• Basic education: Need to strengthen local ownership and accountability through local school boards.
• Basic health: Vulnerable to fiscal volatility, especially for church-based health providers.
• Roads: Funding gaps for maintenance, with limited capacity to sustain road infrastructure.

3. Key Constraints and Opportunities

• Weak partnerships between institutions reduce the ability to deliver services effectively.
• Centralized control of non-salary recurrent spending makes institutions less flexible.
• Political influence from higher tiers of government can undermine local-level partnerships.
• Divergent rules between institutions can lead to fragmentation and inefficiency.

Key Recommendations

• Revenue: Donors should support PNG to secure a fair share of natural resource revenues.
• Basic order and justice: Expand village court coverage in urban areas and increase female magistrates.
• Basic education: Protect and enhance the authority of local school boards.
• Basic health: Reduce sector vulnerability to fiscal volatility and strengthen provincial health partnerships.
• Roads: Ensure funding for road maintenance and increase incentives for provinces that maintain roads effectively.

Conclusion

PNG faces a triple crisis of health, economic, and political challenges, with significant impacts on GDP growth, fiscal health, and public service delivery. The report emphasizes the importance of institutional capacity in overcoming these challenges and achieving inclusive and sustainable development. Strengthening institutions and ensuring fiscal consolidation will be critical for the country's future economic resilience.