PNG economic outlook for 2026 shaped by combination of domestic resilience and global uncertainty

Papua New Guinea's economic trajectory for 2026 is being shaped by a complex interplay of global uncertainties and domestic resilience. Key factors influencing this outlook include the ongoing Middle East conflict, which has introduced volatility and increased costs for fuel and freight, alongside improving foreign exchange conditions within PNG. The anticipated Final Investment Decision (FID) for the Papua LNG project later this year is also a critical element.

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Despite external pressures, the economy remains steady. Growth is forecast at 4.6percent in 2026, following a stronger expansion of around 5.5percent in 2025, supported by both resource and non-resource sectoral growth.

Economist Shamal Chand, in the Westpac Pacific quarterly report, explained that despite external pressures, the economy is expected to remain steady. Growth is forecast at 4.6 percent in 2026, following a stronger expansion of approximately 5.5 percent in 2025. This growth is projected to be supported by advancements in both the resource and non-resource sectors. PNG has implemented a K1.0 billion fuel stabilization program to mitigate the impact of higher fuel costs, capping domestic prices and supporting importers.

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Geopolitical developments have added volatility to global markets, driving higher fuel and freight costs. PNG has moved quickly to cushion the impact through a K1.0 billion fuel stabilisation program, which capped domestic fuel prices at March levels while supporting importers. Importantly, efforts are underway to strengthen longer-term energy security and fiscal buffers, likely supported from stronger resource export receipts. Improvements in connectivity are also evident, with the rollout of Starlink services and the launch of the Pukpuk 1 submarine cable supporting business activity and digital access. Communications is one of the largest growing sectors in the national accounts.

Improvements in connectivity are also noted, with the rollout of Starlink services and the launch of the Pukpuk 1 submarine cable enhancing business activity and digital access. The communications sector is identified as one of the fastest-growing segments in the national accounts. Non-resource sectors, particularly agriculture, industry, and services, continue to drive economic momentum, with increased activity observed in provincial centers.

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The Non resource sectors continue to drive momentum, particularly across agriculture, industry and services, with activity expanding in provincial centres.

Inflation remains relatively contained at 2.24 percent year-on-year in the March quarter, though regional disparities exist. The Bank of PNG has maintained its Kina Facility Rate at 5.0 percent and the Cash Reserve Requirement at 9.0 percent, while preserving the crawl-like exchange rate regime as the Kina is considered overvalued. Foreign exchange conditions have improved significantly, aided by IMF-backed reforms, leading to reduced clearing times and better liquidity. LNG exports are steady, and gold exports have strengthened considerably due to higher prices and production outperformance. Cocoa exports have provided a strong windfall, while coffee prices are beginning to soften.

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Inflation remains relatively contained at 2.24percent y/y in the March quarter, although pressures are uneven, with higher inflation across the Highlands compared with Port Moresby and Lae. At the same time, underlying inflation is firming, while import volumes remain elevated, as reflected in our ports tracker, signalling continued strength in consumption activity.