S&P affirms PNG's 'B/B' ratings and stable outlook

11:39 am on 24 April 2019

The global ratings agency Standard & Poors has given Papua New Guinea a B/B rating with a stable outlook, in its latest assessment.

PNG money

Photo: RNZ Pacific/ Koroi Hawkins

PNG's economy has been under strain for several years, but S&P said it expected fiscal performance to improve during the period to 2022.

It puts this down to favourable resource tax collection and a tightening of expenditure.

As such, the agency said it was affirming its 'B' foreign and local currency long-term ratings and 'B' respective short-term rating on PNG.

It said the stable outlook reflects its view that PNG will remain a low-income economy with weak institutions and limited monetary flexibility.

Looking further ahead, S&P cited a gas project, an agreement signed by PNG's government with French company Total.

"We expect economic growth to be relatively subdued until 2021, then to increase sharply to 5 percent in 2022 and beyond due to the construction of the Papua liquefied natural gas (LNG) project."

The agency said PNG's economic growth suffered in 2018 due to the 7.5 magnitude earthquake that hit the Hela and Southern Highlands province in February.

The disaster led to property destruction and at least 150 fatalities.

The economic impact was partially offset by PNG hosting the Asia Pacific Economic Cooperation (APEC) annual meetings, boosting construction and services in the country.

"We estimate real GDP growth was stagnant in 2018, from an average of 2.1 percent in 2016-2017."

The government has stated its intention to narrow the fiscal deficit and focus on PNG's longer-term strategy of economic diversification.

However, it is increasing its reliance on external borrowings.

"We anticipate interest payments to remain broadly stable, but relatively high, at about 14 percent of general government revenues until 2022."