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ADB sees strong economic growth in Pacific
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Posted on Sep 18 2008
[B]PORT MORESBY, Papua New Guinea[/B] (The National/PIR)—The economies of the Pacific region are expected to grow an overall 4.8 percent this year due to the relatively strong economic performances of resource-rich Papua New Guinea and Solomon Islands, the Asian Development Bank says in a major new report.
The Asian Development Outlook 2008 Update, released yesterday says the new projected growth rate—up from 4.4 percent forecast in April—is the highest in the region since the mid-1990s, but warns that high food and oil prices threaten the pace of future expansion.
Recently, Treasurer Patrick Pruaitch put PNG’s economic growth at around 7.6 percent.
“High commodity prices are hurting vulnerable people in the Pacific, particularly those living in urban squatter settlements or remote, rural areas,” says Indu Bhushan, officer-in-charge of ADB’s Pacific department.
Already in PNG, high fuel and food prices have caused hardship, leading to a protest by students at the University of Technology, who have demanded that government start buying and distributing food to workers with its surplus funds.
The Government was given 21 days to respond to this demand.
The ADO update—which follows the initial outlook for the year released in April—says the higher overall growth projection offsets a downgrade in the outlook for six of ADB’s 14 Pacific developing member countries, due to a loss in spending power stemming from higher oil and food prices.
Despite the upward growth revision overall, the report says renewed efforts are needed by Pacific countries to adjust to higher prices, including reducing their reliance on oil and raising local food production.
Such measures will lessen the adverse impact of high prices and help sustain growth.
A new ADB technical assistance grant of US$225,000 will help some Pacific countries take action to respond to high fuel and food prices. Measures will include identifying short to medium-term policies needed to address price increases, including strengthening social safety nets, and promoting energy conservation.
In 2007, the Government allocated PGK100 million [US$40 million] for agriculture, but to date the department of agriculture and livestock has not spelt out a clear guideline on increasing local food production as a substitute to import, given the high food prices.
A confidential report released by sources within DAL suggests some of the PGK100 million has already been spent on areas outside the parameters of the use of these funds.
