Bank South Pacific (BSP) said Papua New Guinea’s economy remains “reasonably resilient” but warned that rising global and domestic pressures could weigh on growth for the rest of 2026.
The bank released its March quarter 2026 Economic and Market Pulse, highlighting increasing uncertainties, including widening fiscal deficits, inflation risks, questions over the sustainability of the artificial intelligence-driven investment cycle, and the ongoing conflict in the Middle East.
BSP Group chief executive Mark Robinson said the country’s economic performance continues to be supported by commodity exports, government spending and infrastructure investment.
“At present, PNG’s economy remains reasonably resilient, supported by commodity exports, fiscal spending, and infrastructure investments,” Robinson said. “Looking ahead, the picture for the remainder of 2026 will be more complicated, with higher energy prices somewhat offsetting a moderately optimistic growth outlook.”
He said higher fuel costs are placing pressure on both the broader economy and household budgets, which could dampen growth momentum.
“The PNG economy and household budgets are facing pressure from higher fuel prices, weighing on the growth outlook,” he said, adding that government measures to ease the burden on consumers are “welcome”.
Robinson noted that elevated global energy prices could also present opportunities, particularly in the liquefied natural gas sector.
“PNG is already benefitting from elevated global LNG prices, and our distance from conflict zones is enhancing our appeal as a reliable alternative LNG supplier to Asian markets,” he said. “This is an opportune moment for the future of the Papua LNG Project.”
Across the South Pacific, BSP said the economic outlook has been supported by easing inflation, which provides some buffer against rising energy costs and supply constraints, particularly given the region’s dependence on imported fuel.
Robinson said businesses and governments should focus on resilience and adaptability amid heightened uncertainty.
“In times of uncertainty, investing to build resilience and preparing through active scenario planning, while maintaining flexibility to capture new opportunities, are important tools to weather energy shocks and other economic uncertainties,” he said.
The report also includes analysis of the foreign exchange market and the kina’s performance, alongside a broader economic review by BSP’s economists.
