World Bank : Global oil drop will affect PNG Economy

The drop in global oil prices this year will have an effect on Papua New Guinea’s economy, the World Bank says.
The bank said the impact would depend on a number of factors including the duration of fall in oil prices.
The bank highlighted other factors as:

• Terms of contract for LNG exports from Papua New Guinea. The contract terms would determine the impact of falling oil prices on value of LNG exports and consequently, revenue from LNG exports; 
• the increase in domestic spending due to a fall in fuel prices in PNG and consumers having more money to spend on other goods and services (A positive impact on goods and services tax collections); and,
• For oil and gas producing firms, decline in oil and gas prices would have an adverse effect on profit while those who were net users of oil and gas would have a positive effect on profit. 

The overall impact on company and income tax, would determine effect outweigh the other economy-wide.
When asked whether drop in global oil prices would have some effect on the country’s 2015 National Budget of K16.2 billion, the World Bank said: “PNG  is a producer of petroleum products and the impact on the budget would depend on a number of factors as well.”
According to its Economic Update East Asia and Pacific Region, short-term challenge for both macroeconomic management and fiscal planning stems from volatility and unpredictability of oil prices.
The bank said while adhering to fiscal responsibility and prudence, there’s a need to continually focus on investing in quality human and physical capital, building robust, well-functioning institutions and ensuring that the economy is integrated into the global economy.
These actions, the bank noted, would support sustainable and inclusive development in the country.

PNG Today / The National