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Perhaps the second largest impact of major virus outbreak of Coronavirus currently gripping the world’s second largest economy, China, will impact Papua New Guinea direct and indirect according to the World Bank.
Following the release of its first economic update of the country’s economy, the development partner, has indicate that the impacts of the Coronavirus, that has stifled China’s manufacturing industry will affect both PNG’s export and import sector.
World Bank senior economist to PNG, Ilyas Sarsenov pointed out that direct impacts on the economy of Papua New Guinea is the transmission mechanism through trade channel.
“We all know exports of commodities and our liquefied natural gas (LNG) and other minerals are key commodities exported by Papua New Guinea to China and other countries.
“So if there is lower demand because of lower consumption and supply side disruption in China the external demand for these commodities may weaken and as a result export trading may be affected negatively.
“Moreover, there are indirect effects that we do see, and already experienced through the downward adjust in commodity pricing globally.
“So if prices for LNG, Gold, copper, and some other agricultural produce will be lower they will also impact exports of the country to be lower with negative implications for economic growth and fiscal revenue of the government,” Ilyas explained.
He said other than this the oversupply of LNG into the global market has already started emerging and this may also affect the volume of exports from Papua New Guinea.
He also pointed out on the part of import effects was also a concern for many that could affect the retail space considering the closing of major manufacturing hubs within China and the substitutions that importers may seek elsewhere .
“We should consider the situation in China we know the demand and supply side have already been affected by the Coronavirus.
“Some people do not go to work, supply chains are disrupted and this may lead to lower production in the economy with some negative implication of delivery of products to many countries including Papua New Guinea.
“At the same time we do expect that if this happens on the imports side there could be some import substitutions towards probably more expensive substitutes elsewhere.
“Those machinery that Papua New Guinea used to bring in and was planned to bring into the country can be substituted by other goods and machinery elsewhere, but it will have a price effect on the economy, so the imports of capital goods as a result will be higher costing the economy more,” Ilyas pointed out.
SOURCE: POST COURIER/PACNEWS
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