cent in 2013. let me elaborate a bit on this projection. bis central bankers ’ speeches if executed as envisaged, the 2012 / 2013 budget could stimulate a firm recovery in construction activity and, by extension, economic growth through certain public construction projects and tax incentives for construction of residential and commercial buildings. however, contracts would need to be awarded soon and the pace of project execution would need to be accelerated if the planned programs are to be implemented on schedule. continued delays in settling the long - standing payment of arrears to contractors could dampen these expectations. in principle, the sluggish recovery should not have a significant impact on employment creation. however, the projects that the government has targeted for implementation do have a high labour intensive component, and could help to somewhat ease the current tightening we have seen in the labour market. i should also point out that the revival of growth and substantial fiscal deficit programme for fy 2013 should not re - kindle underlying inflationary pressures because considerable slack still exists in various parts of the economy, as evidenced by excess capacity in manufacturing and other activities. nonetheless, bottlenecks in key sectors such as construction could lead to escalation of prices in these areas while the level of wage settlements would also influence the pace of household spending. barring any weather - related setbacks or a new round of commodity price shocks, inflation is projected to remain below double digits in 2013. budget 2013 announced the removal of vat on food. based on analysis done at the central bank, we estimate that the immediate impact of the removal of vat on certain food items could reduce by 2½ per cent the cost of food for an average consumer ( based on the cso ’ s basket of goods in the retail price index ( rpi ) ). it should be noted, however, that the most volatile food items driving inflation, fruits and vegetables, are already zero - rated. budget 2013 also removed the fuel subsidy on premium gasoline. again, based on the bank ’ s analysis, we do not expect the reduction in the subsidy of premium gasoline to significantly impact inflation in the short term. the higher price of premium gasoline could increase the rpi by around ½ per cent in the first round, with the impact concentrated on the users of higher - end vehicles unable to substitute to other fuels. however, as the petroleum subsidy is cut across the board over the next few years, the cost of transportation and some related goods and services will increase. ladies and gentlemen there are

loi m bakani : the state of the economy and monetary policy address by mr loi m bakani, governor of the bank of papua new guinea, to the national development forum, port moresby, 18 august 2010. * * * thank you chairman, mr brown bai. honourable paul tiensten, m. p. minister for national planning and rural development, leader of the opposition, sir mekere morauta kbe, deputy opposition leader hon. bart philemon mp, acting chief secretary mr manasupe zurenuoc, heads of government departments and state agencies, members of the consultative implementation monitoring council, my fellow colleagues on the panel, mr. simon tosali secretary department of treasury, mr. joseph lelang secretary department of national planning, monitoring and rural development, and mr. henry parakei, secretary department of transport, distinguished participants. papua new guinea is enjoying the fourth year of relatively high economic activity as measured by the real growth in gross domestic product ( gdp ). the average annual growth in gdp for the four years 2007 to 2010, is estimated at 6. 7 percent which translates to a per capita growth of 4. 3 percent per annum. to put it in another way, at the end of 2010 our people will be 18. 3 percent better off from where they were at the beginning of 2007. this trend is likely to continue for the next three years, during the construction period of the liquefied natural gas ( lng ) project. even more important then the overall growth in gdp is the estimated non - mineral sectors growth of 7. 2 percent per annum. this translates to a per capita growth of 4. 7 percent, the highest and longest period of growth on record since independence. it is estimated that at the end of 2010 the great majority of our people, those in the non - mineral sectors will be 20 % better off from where they were at the beginning of 2007. despite the global financial crisis and meltdown in 2008 and the slow recovery from it in 2009 and 2010, the papua new guinea economy continued to grow and performs exceptionally well. we managed to avoid all the financial problems and at the same time have the best and longest stretch of growth in economic activity from the time of independence. the country is enjoying a mineral boom through the increase in international commodity prices, which resulted in large government surpluses up to 2008, and high accumulation of funds in trust accounts, that reached a peak of above k5 billion.