Governor Allan Bird sheds light on Papua New Guinea’s widening gap between nominal and real GDP, revealing the true impact of inflation, debt, and poor policy decisions on everyday citizens. Learn why citizens are feeling the pinch.

Papua New Guinea’s economy is under growing scrutiny after East Sepik Governor Allan Bird revealed a major gap between the country’s nominal GDP and real GDP, exposing why many citizens are struggling to cope with rising prices and stagnant growth. Speaking on the FM100 Talkback Show, Governor Bird highlighted how inflation, excessive borrowing, and poor policy choices have inflated official figures without improving real economic conditions, urging transparency and a renewed focus on productive sectors like agriculture to drive recovery.

Unpacking Papua New Guinea’s Economy: Allan Bird Exposes Real GDP Crisis

In a recent FM 100 talkback show, Governor Alan Bird provided a candid analysis of Papua New Guinea’s (PNG) economic challenges. Drawing from a graph released by the National Statistical Office (NSO). He highlighted the stark difference between nominal and real GDP, shedding light on why everyday citizens are feeling the pinch of inflation, borrowing, and poor policy decisions of the current Marape-Rosso Government.

This article summarizes the key points from the discussion, offering overview of PNG’s economic realities and potential ways forward.

WATCH: PNG’s Economic Crisis: Real GDP per Capita Plumets 9% – Allan Bird FM100 Talkback Show

WATCH: Part 1: FM100 Talkback Show with Allan Bird

WATCH: Part 2: FM100 Talkback Show with Allan Bird

Gap Between Nominal and Real GDP

At the heart of the conversation is the NSO’s GDP graph, which reveals a significant disconnect between nominal GDP (the headline figure inflated by price changes) and real GDP (a measure of actual economic output and buying power).

Nominal GDP Explained: This figure, currently around 110.6 billion kina for 2023 (projected to rise to 120 billion), includes the effects of inflation, currency devaluation, and government borrowing. As Governor Bird noted, it’s easy to inflate this number by printing money or devaluing the kina, but it doesn’t reflect true economic health. For instance, Prime Minister James Marape often cites these growing figures as signs of progress, but they mask underlying issues.

Real GDP Reality: In contrast, real GDP stands at about 69 billion kina, showing a 40 billion kina gap. This represents stagnant economic growth since the Somare era, with little improvement in actual production or purchasing power. Governor Bird illustrated this with a simple analogy: what once bought 100 kina worth of goods now only gets you about 64 kina’s worth, due to rising prices and inefficiency.

This gap is felt in daily life through higher costs for essentials like rice, tinned fish, and fuel. The graph, as Bird pointed out, aligns with periods of heavy borrowing and poor investments, such as the shutdown of the Pogera project, which cost PNG billions in potential foreign exchange.

Government Policies and Their Pitfalls

Governor Bird was forthright about the government’s role in exacerbating these problems:

Borrowing and Inflation:

Excessive borrowing and money printing have fueled inflation, making nominal GDP look artificially strong. He criticized decisions like renegotiating LNG projects (e.g., Papua LNG), which delayed revenue and worsened foreign exchange shortages.

IMF Loan Concerns:

Referring to critiques from experts like Dr. Thomas Wangi of the National Research Institute, Bird warned that the recent IMF loan could drive up import inflation. Instead of propping up the currency, funds should be directed toward boosting productive capacity, such as agriculture and exports.

Public Service Inefficiencies:

PNG’s public sector is bloated and unproductive, with low output despite high spending. Bird suggested reforms, like transforming the Public Services Commission into an independent oversight body to measure and improve performance. This could reduce waste, curb corruption, and redirect resources to critical areas like healthcare and policing.

He emphasized that misplaced investments such as politically motivated roads with no economic return have hindered growth, leaving the economy stagnant while the grows.

The Role of Agriculture in Economic Recovery

As a leader from an agricultural province, Governor Bird stressed the need to revive PNG’s export-driven strategy, a successful approach from the Somare government:

Boosting Production:

Increasing output in key sectors like coffee, cocoa, oil palm, and coconuts is essential. Stagnant exports over the past decade have contributed to the economic slowdown, so investing in productive capacity such as fertilizing crops could strengthen the kina and narrow the GDP gap.

Practical Advice:

For individuals, Bird recommended seizing opportunities in agriculture. With high global prices for cocoa and coffee, small investments like buying fertilizer for 100 kina could yield significant returns next harvest season.

Challenges

The discussion ended on a note of urgency, with Governor Bird calling for honesty in economic reporting. He acknowledged the NSO’s role in publishing these insights, which challenge optimistic narratives and highlight the need for better decisions.

Governor Bird’s insights reveal that PNG’s economic struggles stem from poor policy choices. There’s potential for economy recovery if the government is focusing on real growth, efficiency, and productive investments, By focusing on real growth, efficiency, and productive investments, there’s potential for recovery. As he put it, “Numbers don’t lie,” and understanding them is key to a brighter future.

What are your thoughts on PNG’s economy?

Share in the comments below, and stay tuned for more discussions on economic reforms. For more details, check the NSO’s graph or Governor Bird’s social media posts.

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