Up till Mid of 2025, PNG’s economy shows two very different stories. Sales and jobs are up, helped by resource exports and government spending. But credit growth is weak, and external pressures are building up.

Sales rose 12.7% in the March quarter compared to a year earlier. Mining, wholesale, transport, and agriculture drove the gains, supported by strong gold and cocoa prices and steady public spending. Employment followed, up 3.3% year on year and 1.1% over the quarter. Jobs were added in retail, construction, and logistics.

But the non-mineral economy went backwards, contracting by 0.7%. Construction, manufacturing, and services remain sluggish, reflecting delayed investment and cash flow constraints.

The balance of payments deficit narrowed to K1.5 billion in the year to March, down from K2.0 billion the year before. A K7.7 billion trade and income surplus was outweighed by an K8.1 billion financial account deficit, driven by offshore investments and debt repayments.

Reserves fell to K13.2 billion (US$3.2 billion), still covering six months of imports but trending lower. BPNG intervened heavily, selling US$486 million in the first five months to support the market. These moves helped. Forex orders dropped from K795 million in January to K127 million in May, and interbank trading resumed. The kina continued its slow depreciation, down 2.4% against the US dollar and 5.8% against the Australian dollar by May.

Private sector credit grew just 0.4% in the first quarter. Broad money supply fell 6.6%. Excess reserves at commercial banks dropped almost 30% as BPNG’s interventions drained liquidity. Banks remain liquid, with assets equal to 42.5% of deposits. But lending is subdued, and the interest rate spread is stuck at 7.83%, showing weak competition and limited policy transmission.

Headline inflation jumped to 5.3% in March, up from 0.7% the previous quarter. Food, alcohol, and clothing led the increase. Core inflation is steadier, around 3%, but above trend due to kina depreciation and higher import costs. The Retail Price Index eased to 0.7% in May, hinting at some stability ahead, but risks remain.

The recovery continues, but it is uneven. Resource-linked sectors are driving growth, while the non-mineral resource struggles. Credit is weak, and external buffers are eroding.

BPNG’s weekly forex auctions and greater transparency are positive steps, but sustained inflows from mining will be critical. Domestically, improving access to credit, fostering banking competition, and maintaining fiscal discipline will be key to managing risks.

All data are sourced from official releases.