KFMIC Report: Friday, 23 October 2015

PNG Macro Environment

KFM still maintains its view that real GDP growth should increase from 8.4% in 2014 to levels around 9.0% in 2015 compared to Budget revised projection of 11.0%* noting S&P’s downgrade. We also note the announcement of approved expenditure cuts to the 2015 Budget of c.K1.4b as a response to drop in commodi-ty revenues, following the release of the Mid-Year Fiscal Economic Outlook (MYEFO). The continued dry weather conditions brought on by the El Nino contin-ue to affect key sectors in PNG especially agriculture, utilities and mining sector with low water levels and crop yields. In light recent CPI, KFM has revised its view on inflation to be around 6.0% mainly driven by continued downward momentum of the Kina against the US$.

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