Economic growth across the Pacific is expected to moderate to 3.4% in 2026 and 3.2% in 2027, weighed down by higher oil prices, commodity price spikes, and trade uncertainty stemming from the ongoing Middle East conflict, according to the Asian Development Bank’s (ADB) Asian Development Outlook (ADO) April 2026. Inflation in the region is projected to rise to 4.2% this year before easing to 3.5% in 2027. ADB Director General for the Pacific Emma Veve said there is “an unprecedented need for the Pacific to build resilience against the economic impacts of the Middle East conflict,” warning that the adverse effects on growth and inflation are likely to intensify if the conflict drags on.
Papua New Guinea (PNG), the subregion’s largest economy, is forecast to grow at 3.6% in 2026 and 3.4% in 2027, with mining — particularly at the Porgera and Lihir sites — remaining the main growth driver. But structural challenges including power shortages, security concerns, and weak public capital spending continue to hold back broader development, amplified by inflationary pressure from global commodity markets. In Fiji, the second-largest economy, growth is projected to slow from 3.0% in 2025 to 2.9% in 2026 and 2.7% in 2027, as tourist arrivals soften and investors hold back ahead of general elections. Non-communicable diseases are placing a growing burden on Fiji’s health system, and ADB says increased investment in primary care is urgently needed.
Elsewhere, Solomon Islands is expected to grow at 3.0% in 2026 as mining activity eases and higher oil prices dampen activity, while Vanuatu stands out with projected growth of 4.7% this year, buoyed by post-earthquake reconstruction. In the Central Pacific, growth is easing in Kiribati, Tuvalu, and Nauru as fiscal expansion slows. North Pacific economies are on divergent paths: the Marshall Islands is picking up speed with 3.7% growth projected for 2026, while Palau is decelerating from a high base and the Federated States of Micronesia remains broadly stable at 1.0%.
Across the South Pacific — including the Cook Islands, Samoa, Tonga, and Niue — growth is moderating as the post-pandemic tourism boom normalizes and large infrastructure projects wrap up. Inflation has largely eased in these economies but remains exposed to energy and import price shocks. The ADB cautions that its forecasts were finalized in mid-March under unusually high uncertainty, and that a longer or more severe Middle East conflict could push outcomes significantly below current projections across the entire subregion.
