Papua New Guinea’s economy will grow 3.6% in 2026, down from the 4%-plus pace the government has promised voters, according to the Asian Development Bank’s April outlook. The bank cut its 2027 forecast to 3.4%. Behind the number: a Middle East war disrupting oil markets 8,000 kilometres away, a power grid that still cannot keep the lights on in the capital, and a state that has not moved fast enough on the reforms it promised the world’s financial watchdogs.
For a government that built its 2026 budget on a forecast of roughly 4% growth and a K140 billion economy, the ADB’s number is not a rounding error. It is a 0.9 percentage point gap between what Waigani has told citizens to expect and what the region’s most influential development lender says is coming. That gap will show up in tax receipts, in debt servicing costs, and in every boardroom in Port Moresby now recalculating what 2026 actually looks like.
The Number, and Who Else Is Calling It Different
The ADB’s Asian Development Outlook, released in Manila on 10 April and presented in Port Moresby a week later, puts PNG growth at 3.6% for 2026 and 3.4% for 2027. That is down from the 4.2% the same bank forecast for 2025, and it drags the whole Pacific subregion lower — from 4.2% growth last year to 3.4% this year, according to the ADO’s regional breakdown, because Papua New Guinea is the subregion’s largest economy and its slowdown mainly explains why the Pacific as a group is projected to ease to 3.4% in 2026 and 3.2% in 2027.
The Bank of Papua New Guinea has already gone further. Governor Elizabeth Genia told a Port Moresby briefing on 9 March that domestic growth would moderate to around three percent in 2026, a return to a more sustainable pace after last year’s rebound. She had earlier revised 2025 growth up to 5.3%, driven by stronger LNG and mineral output — meaning the central bank sees a sharper deceleration than the ADB does, not a milder one.
Prime Minister James Marape has held a different line, telling the public that growth above 4% in 2026 would push the economy past K140 billion. Three institutions, three numbers: ADB at 3.6%, BPNG at roughly 3.0%, and the Prime Minister’s office near 4%. That is not a rounding dispute. It is close to a full percentage point of disagreement about the size of next year’s economy — and every one of PNG’s 2026 budget assumptions, from the deficit target to debt-service ratios, was built on the higher end of that range.
Oil Half a World Away, Diesel Down the Road
The ADB’s downgrade is not primarily a story about PNG. It is a story about the Middle East, transmitted through PNG’s fuel bill. ADB projects growth across developing Asia and the Pacific will moderate to 5.1% in both 2026 and 2027, and the bank has been blunt about why: a conflict thousands of kilometres from Port Moresby that is pushing up the price of the diesel PNG burns to keep its lights on.
ADB’s country director for PNG, Takafumi Kadono, named the mechanism directly. Mining will likely remain a key growth driver in the near term, but the Middle East conflict will hurt the non-resource sector, particularly because PNG still depends on imported diesel fuel for power generation, he said. The Pacific’s own director general at the ADB, Emma Veve, put the exposure in blunter terms at the regional launch: there is an unprecedented need for the Pacific to build resilience against the economic fallout of the Middle East conflict, with higher oil prices, commodity spikes and trade uncertainty set to weigh on growth across the subregion.
That exposure is structural, not incidental. Genia told the same March briefing that when the conflict broke out, it forced the central bank to redraw its baseline days after finalising it. The IMF’s January outlook had projected global growth of 3.3% for 2026, easing to 3.2% in 2027 — a baseline that, in Genia’s words, “changed materially” within ten days of the fighting starting. Maritime disruption near the Strait of Hormuz pushed energy prices up before PNG’s own monetary policy committee had even finished its March meeting.
On the ground, the ADB expects the hydrocarbon sector — roughly 70% of resource output — to see modest gains from higher oil prices, with both oil and LNG production ticking up slightly in 2026. But that upside sits mostly in the resource sector. Small businesses, transport operators and manufacturers who run on imported diesel see the same conflict as a cost shock, not a windfall.
The Old Constraints Haven’t Gone Anywhere
Strip out the war and PNG’s growth story would still be capped by problems the country has carried for years. The ADB’s Pacific-wide release named them explicitly: power shortages, security, the efficiency of public capital spending, and skilled human resources continue to weigh on the outlook, now amplified by inflationary pressure from the Middle East conflict.
None of that is news to anyone running a business in Port Moresby. Blackouts remain routine enough that Kadono referenced one at his own press conference — a brief power cut during the ADO launch event itself, which he cited as evidence of the urgency of grid investment. Security costs are baked into every corporate budget. And a government that has posted six straight years of non-resource growth above 4%, on its own telling, still cannot reliably execute the capital projects meant to fix the constraints underneath that growth.
Inflation adds a second layer of pressure. BPNG projects headline inflation around 4% in 2026, core inflation in a 2.5%-to-3% band. The Pacific-wide ADB figure is close: 4.2% in 2026, easing to 3.5% in 2027. Higher energy costs feed directly into transport, food distribution and the price of nearly everything trucked or shipped into a country with limited domestic manufacturing.
Grey-Listed, and Racing a Clock
Layered on top of the growth downgrade is a compliance deadline PNG cannot afford to miss. The country was placed on the Financial Action Task Force’s grey list — increased monitoring for anti-money-laundering and counter-terrorism financing gaps — and given 18 milestones to clear under an action plan agreed with the National Coordinating Committee in January. The first deadline lands at the end of September, roughly 90 days from now.
Genia has tried to manage the message without minimising the stakes. Grey listing does not mean PNG is sanctioned or unsafe to do business, she said — many countries have gone on the list and come off it once reforms landed. What it does mean, in her words, is that international banks and counterparties will apply more scrutiny to money moving in and out of the country, translating into extra compliance checks for any PNG business that touches foreign currency, trade finance or correspondent banking. Legislative changes are coming before the September deadline, she said, but the real test will be demonstrating that PNG’s anti-money-laundering framework works in practice, not just on paper.
Miss the September milestones and the grey-list clock resets against a slower-growth backdrop than the one PNG built its budget around — a combination that would hit foreign exchange availability and correspondent banking relationships precisely when both are already stretched.
The Case for Upside: Papua LNG
The one lever big enough to move PNG’s growth trajectory in the other direction sits with a French oil major, not with Waigani. The ADB itself flagged it: a final investment decision on Papua LNG would provide, in the bank’s language, a significant boost to activity beyond the current forecast.
The project has been close to sanction for longer than most in Port Moresby would like. TotalEnergies chief executive Patrick Pouyanne has told partners the target is mid-2026, and Prime Minister Marape said in late June that Pouyanne personally assured him FID would land this year, following a bilateral meeting with French President Emmanuel Macron. The government is now preparing a Development Forum for late June through early July to bring landowners, the Gulf Provincial Government and Central Province into a benefit-sharing agreement — the one step Marape has acknowledged must clear before FID can proceed.
The economics have moved in the project’s favour. Early cost estimates near US$18 billion were judged financially unworkable; a revised bidding process brought that down to roughly US$14 billion, and JGC and Hyundai E&C secured the engineering and construction contract in April. Marape’s own framing was pointed: Papua LNG, at 6.6 trillion cubic feet, is a fraction of the size of the 80 trillion cubic feet projects TotalEnergies runs in Mozambique — a reminder that PNG is not a priority asset in Total’s global portfolio, and that continued delay costs Port Moresby more than it costs Paris.
If FID lands in 2026, the growth effect will not show up in this year’s GDP print. But it would reset the multi-year trajectory the ADB, BPNG and Treasury are all currently arguing about — turning a debate over whether 2026 growth is 3% or 4% into a longer conversation about what a second LNG train does to PNG’s fiscal base through the 2030s.
What It Means for Business
For executives reading three different growth numbers from three credible institutions, the practical takeaway is not to pick a favourite forecast. It is to build a plan that survives the 3%-to-4% range rather than betting on the top of it. Budget cycles anchored to the government’s more optimistic 4% assumption face real downside risk if BPNG’s more cautious 3% reading proves closer to the mark — particularly for businesses exposed to public procurement, where slower nominal GDP growth compresses the same revenue base the 2026 budget was built to tax.
Second, treat the FATF deadline as a live commercial risk, not a background policy story. Any business dependent on trade finance, letters of credit or foreign currency settlement should be asking its banking partners now what additional documentation grey-list compliance will require after September — not after a transaction gets delayed.
Third, watch Gulf Province, not Waigani, for the signal that actually moves the growth number. A landowner agreement at the Development Forum this year matters more to PNG’s 2027-2030 trajectory than anything in the current budget cycle.
The Bigger Picture
PNG’s growth debate sits inside a larger regional story the ADB is telling about the Pacific: small, import-dependent economies with limited buffers against a conflict none of them had any part in starting. Fiji faces its own slowdown, from 3.0% growth in 2025 to a projected 2.9% in 2026, as tourism operators brace for a general election and softer visitor arrivals. Across the Pacific, the pattern repeats — economies that built momentum in 2025 now recalibrating against a 2026 that looks less like a resource boom and more like a test of how much external shock a small, diesel-dependent economy can absorb before growth stalls entirely.
The ADB’s Kadono called 2026 a year of reset for PNG — a chance to convert resource wealth into outcomes that show up outside the mining and LNG sector. The forecast gap between Waigani, BPNG and the ADB suggests the reset has not yet produced agreement on the basic facts. Until it does, every business plan built on a single PNG growth number is building on someone’s guess.
