29 Dec 2004

Economic forecasts for PNG pick up with some reservations

2:15 pm on 29 December 2004

The economic forecast for Papua New Guinea in the New Year appears to be relatively upbeat.

The credit ratings agency, Standard & Poor's, has just changed Papua New Guinea's rating from stable to positive.

The agency says the revision reflects improvements in PNG's performance on the back of higher commodity prices and the prospect of further improvement with assistance from Australia.

Standard and Poors says the new natural gas pipeline project is also partly responsible for an upgraded credit rating.

Our correspondent in Port Moresby, Peter Niesi, says this government and the Treasurer, Bart Philemon, have developed a positive reputation over their handling of macro- economic activities:

"They've now basically established a siutation where foreign reserves are the highest ever since PNG got independence in 1975... and one of those things that National Alliance and and people like Bart Philemon have been renown for is working on improving the economy of the country."

Peter Niesi.

However, the ratings on PNG are still constrained by the economic vulnerabilities inherent in a small, undeveloped, commodity-based, and low-income economy.

Standard & Poor's credit analyst, Philippe Sachs, said very little had been done to broaden the country's economic and revenue base, which means if commodity prices decline, so will PNG's economic and fiscal performance