Presentation to the Members of Parliament 19 September 2007 State - - PowerPoint PPT Presentation

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Presentation to the Members of Parliament 19 September 2007 State - - PowerPoint PPT Presentation

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Presentation to the Members of Parliament 19 September 2007 State of the Economy 2002 -2007 Secretary for Treasury Simon Tosali Presentation Outline Structure of the Economy Budget operations Summary Economic Forecast

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SLIDE 1

Presentation to the Members of Parliament

19 September 2007

State of the Economy 2002 -2007 Secretary for Treasury Simon Tosali

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SLIDE 2

Presentation Outline

Structure of the Economy Budget operations Summary Economic Forecast Challenges

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SLIDE 3

GDP growth

  • 3

3 6 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

  • 3

3 6 GDP Non-mining GDP Per cent Per cent Average GDP growth 2002-2007 Average GDP growth 1997-2001

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SLIDE 4

Contributions to growth in Real Gross Domestic Product

(Percentage points) 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Actual Prelim. Prelim. Est Est Proj Proj Proj Proj Proj Proj Agriculture, Forestry and Fishing

  • 1.6

1.8 1.7 0.7 0.3 1.6 1.8 1.6 1.2 1.3 1.7 Oil and Gas Extraction

  • 2.0
  • 0.1
  • 0.3

0.4 0.0 0.0

  • 0.2
  • 0.3
  • 0.3
  • 0.2
  • 0.2

Mining and Quarrying

  • 0.3

0.4 0.3 0.2

  • 0.7

0.6 1.5 0.5 1.5 0.7

  • 0.5

Manufacturing

  • 0.4

0.4 0.2 0.7 0.4 0.3 0.3 0.3 0.3 0.3 0.3 Electricity, gas and water 0.0 0.2 0.1 0.0 0.0 0.0 0.1 0.1 0.1 0.1 0.1 Construction 2.6 0.6 0.3 0.5 1.3 1.3 1.0 0.7 0.8 0.8 0.5 Wholesale and retail trade 1.3 0.2 0.2 0.3 0.4 0.4 0.3 0.2 0.2 0.2 0.2 Transport, storage and communication

  • 0.1

0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 Finance, real estate and business services

  • 0.2
  • 0.1
  • 0.1

0.2 0.3 0.2 0.2 0.2 0.2 0.2 0.2 Community, social and personal services 0.4

  • 0.5
  • 0.3

0.2 0.3 0.5 0.3 0.3 0.3 0.2 0.2 TOTAL GDP

  • 0.2

2.2 2.7 3.4 2.6 5.2 5.4 3.9 4.5 3.8 2.8 Total Non-mining GDP 2.5 2.1 3.1 3.1 3.8 5.2 4.7 4.3 3.8 3.8 4.0

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SLIDE 5

Drivers of GDP growth

Volume of key commodities at constant (2007) prices

Oil Copper and Gold Agriculture (Formal) Other sectors

10 20 30 2000 2002 2004 2006 2008 2010 2012 000, barrels 10 20 30 350 400 450 2000 2002 2004 2006 2008 2010 2012 50 75 100 Gold(RHS) Copper(LHS) tonnes 000, tonnes 2000 3000 4000 5000 6000 2000 2002 2004 2006 2008 2010 2012 2000 3000 4000 5000 6000 Km, Gross Value Added Km, Gross Value Added 400 500 600 700 800 900 1000 1100 2000 2002 2004 2006 2008 2010 2012 400 500 600 700 800 900 1000 1100 Km, Gross Value Added Km, Gross Value Added

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SLIDE 6

Agriculture/Forestry/Fishing sector

400 500 600 700 800 900 1000 1100 2000 2002 2004 2006 2008 2010 2012 400 500 600 700 800 900 1000 1100 Km, Gross Value Added Km, Gross Value Added

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SLIDE 7

Main Agriculture Exports

100 200 300 400 500 600 700 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 000,tonnes 100 200 300 400 500 600 700 000, tonnes

PALM OIL

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SLIDE 8

Coffee

10 20 30 40 50 60 70 80 90 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 000, tonnes 10 20 30 40 50 60 70 80 90 000, tonnes

COFFEE

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SLIDE 9

Cocoa

10 20 30 40 50 60 70 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 000, tonnes 10 20 30 40 50 60 70 000,tonnes

COCOA

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SLIDE 10

Copra Oil and Copra

10 20 30 40 50 60 70 80 90 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 000, tonnes 10 20 30 40 50 60 70 80 90 000, tonnes

COPRA OIL

5 10 15 20 25 30 35 40 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 000, tonnes 5 10 15 20 25 30 35 40 000, tonnes

COPRA

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SLIDE 11

Logs

500 1000 1500 2000 2500 3000 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 000,m3 500 1000 1500 2000 2500 3000 000,m3

LOGS

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SLIDE 12

Growth and revenues boosted by commodity boom

100 200 300 400 500 600 Jun-87 Jun-92 Jun-97 Jun-02 Jun-07 100 200 300 400 500 600 Index: 100=2002 Copper Oil Gold

1 2 3 4 5 6 1998 1999 2000 2001 2002 2003 2004 2005 2006 1 2 3 4 5 6 7 K Billion K Billion Forcast Mineral revenue Non-Mineral revenue

Mineral & non- mineral Revenue

Commodity Prices

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SLIDE 13

Budget Operations

2002 Revenue 2007 Revenue

Others, 26.5% Personal Income Tax, 21.1% Mining & Petroleum Tax, 7.9% Donor Grants, 21.0% Non-Tax Revenue, 5.2% GST, 8.8% Company Tax , 9.5%

Others, 17.4% Company Tax , 9.3% GST, 7.3% Non-Tax Revenue, 7.1% Donor Grants, 13.3% Mining & Petroleum Tax, 30.9% Personal Income Tax, 14.7%

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SLIDE 14

Revenue profile 2002 to 2007

(Kina,Million) 2002 2003 2004 2005 2006 2007 Actual Actual Actual Actual Actual Proj TAX REVENUE 2,369.9 2,677.9 3,220.1 3,744.0 4,944.8 5,240.7 TAX ON INCOME AND PROFITS 1,491.1 1,786.6 2,223.4 2,770.8 3,823.5 4,004.7

  • DOM. TAXES ON GOODS AND SERVICES

575.7 596.0 620.8 657.3 784.3 850.4 TAXES ON INTERNATIONAL TRADE 303.2 295.3 375.9 315.9 337.0 385.6 NON TAX REVENUE 169.9 239.2 245.1 279.3 428.8 473.1 INFRASTRUCTURE TAX CREDITS 55.2 40.0 34.7 20.3 23.3 35.6 GRANTS 691.4 693.0 849.7 1,283.1 914.6 879.1 TOTAL REVENUE AND GRANTS 3,286.4 3,650.1 4,349.6 5,326.8 6,311.6 6,628.5 % of GDP 28.2 29.0 34.4 34.9 37.0 35.9

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SLIDE 15

Composition of Expenditure

2002 Expenditure 2007 Expenditure

Others 13% Provincial 13% Dev't 29% Interest 7% National 38% Others 5% National 36% Interest 12% Dev't 32% Provincial 15%

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SLIDE 16

Expenditure profile 2002 to 2007

(Kina,Million) 2002 2003 2004 2005 2006 2007 Actual Actual Actual Actual Actual Proj NATIONAL DEPARTMENTS 1357.1 1192.4 1555.1 2233.1 2347.9 2032.1 Personal Emoluments (a) 574.3 618.0 682.2 690.5 698.0 848.2 Goods and Services 782.8 574.4 872.9 1142.6 967.9 1183.9 Gas Acquisition 400.0 Supplementary Budget 682.0 PROVINCIAL DEPARTMENTS 562.9 563.3 656.0 632.5 765.1 696.6 Personal Emoluments 467.2 482.9 580.2 543.4 662.5 576.0 Goods and Other Services 45.7 53.4 54.0 54.6 65.1 63.4 Conditional Grants 50.0 26.9 21.8 34.5 37.5 57.2 AUTONOMOUS BOUGAINVILLE GOVERNMENT 25.0 31.3 35.0 45.3 46.5 50.9 TRANSFERS TO STAT. INS. 164.9 178.4 207.9 206.7 234.3 221.6 INTEREST PAYMENTS AND FEES 436.4 739.6 377.0 332.8 307.0 387.9 NET LENDING TO CSAs

  • 4.8
  • 9.6
  • 10.4
  • 2.7
  • 4.2
  • 4.0

TOTAL RECURRENT 2541.5 2695.5 2820.4 3447.6 3696.7 3385.1 TOTAL DEVELOPMENT (PIP) 1195.0 1079.0 1327.4 1871.5 1559.5 1586.8 Government Funded Projects 524.5 386.0 477.6 588.4 644.9 707.7 Domestic Funds 236.8 207.3 331.6 431.8 471.2 509.1 Infrastructure Tax Credit 55.2 40.0 34.7 20.3 23.3 35.6 Concessional loans 97.5 82.8 94.6 134.3 150.4 163.0 Commercial loans 135.0 55.9 16.8 2.0 0.0 0.0 Donor funded Projects 670.5 693.0 849.7 1283.1 914.6 879.1 ADDTIONAL PRIORITY EXPENDITURE 625.0 450.0 TOTAL EXPENDITURE AND NET LENDING 3736.5 3774.4 4147.8 5319.1 5881.2 5421.9 % of GDP 32.1 30.0 32.8 34.8 34.5 29.4

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SLIDE 17

Financing

  • 1000
  • 500

500 1000 1500 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007

  • 8
  • 4

4 8 12

Per cent of GDP K million K million (LHS) Per cent of GDP (RHS) (Kina,Million) 2002 2003 2004 2005 2006 2007 Actual Actual Actual Actual Actual Proj TOTAL REVENUE AND GRANTS

3231.2 3650.1 4349.6 5326.8 6311.6 6628.5

TOTAL EXPENDITURE AND NET LENDING

3681.3 3774.4 4147.8 5319.1 5881.2 5421.9

DEFICIT (-) / SURPLUS (+)

  • 450.0
  • 124.3

201.8 7.6 430.4 1206.6

% of GDP

  • 3.9
  • 1.0

1.6 0.1 2.5 6.5

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SLIDE 18

Debt repayment

Total Public debt as a proportion of GDP

20 40 60 80 100 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 20 40 60 80 100 Per cent of GDP Per cent of GDP

2002 2003 2004 2005 2006 2007 Domestic 2588 3023 3181 3547 3187 3187 External 5777 4901 4410 3856 3612 3225 Total Public Debt Outstanding 8365 7924 7591 7403 6799 6412 Per cent of GDP 71.8 63.1 60.0 48.5 39.8 34.8

Standards and Poors credit rating for PNG has been upgraded to B+

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SLIDE 19

Summary Economic Forecasts

2002 2003 2004 2005 2006 2007 Actual Actual Actual Actual Actual Proj GDP

  • 0.2

2.2 2.7 3.4 2.6 5.2 Non-mining GDP 2.5 2.1 3.1 3.1 3.8 5.2 Employment growth 1.6 6.2 0.6 1.6 7.8 9.8* Inflation(year average) 11.8 14.7 2.1 1.7 2.6 4.8 Treasury Bill rate (%) 13.3 18.3 9 4.5 5 6 Exchange Rate(USD per PGK) 0.2976 0.2573 0.3117 0.3224 0.3272 0.3378 Foreign reserves(K,million) 1378.1 1702.1 2112.2 2316 4330.7 4684.9** Source: Treasury * Employment growth: BPNG QEB , March 2007 **Foreign reserves up to May 2007

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SLIDE 20

Challenge for the new Parliament

Macroeconomic stability and Political stability achieved . How do we translate these achievements for the people

in both urban and rural areas?

Need more focus on microeconomic reforms and more

funding on priority expenditure items.

Freeing up bottlenecks to the flow of economic resources

throughout the economy

to maximise allocative and dynamic efficiency and deliver the benefits to grassroots Papua New Guineans to

achieve their full potential

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SLIDE 21

Challenges at the micro-level

Electricity-high price, low accessiblity Telecommunications-high price, low coverage Water-high price, low accessibilty Land tenure-lack of certainty Air transport-high price Road transport-need improved maintenance funding Shipping-high price, low accessibilty Health-improvement to infrastructure Law and order-is still a big concern