By Lucy Craymer
WELLINGTON, May 12 (Reuters) – Economic growth across 11 Pacific Island countries is expected to weaken in 2026 as higher energy and shipping costs, slowing tourism momentum and persistent structural constraints weigh on activity, the World Bank said in a report released on Tuesday.
The World Bank’s Pacific Economic Update said growth in the Pacific Island countries it tracks slowed to an estimated 3.2% in 2024 and 2025, down from 6.5% in 2023, and is forecast to ease further to 2.8% in 2026 before edging up to 3.1% in 2027.
“Pacific is clearly the region which we think will be most affected among the regions which clearly are not directly countries in the conflict,” said Ekaterine Vashakmadze, a senior country economist at the World Bank, in an interview.
The report covers Fiji, Solomon Islands, Federated States of Micronesia, Kiribati, Marshall Islands, Nauru, Palau, Samoa, Tonga, Tuvalu and Vanuatu.
The World Bank said the near-term outlook had deteriorated as conflict in the Middle East pushed up delivered fuel, freight and insurance costs, adding renewed pressure to import-dependent Pacific economies.
Vashakmadze added that before the crisis hit the World Bank had been looking to revise growth for the region higher due to tourism and remittances supporting growth in the fourth quarter of 2025 and the beginning of 2026.
Now the shock is expected to reduce 2026 growth by about 0.2 to 0.5 percentage points under the World Bank’s baseline scenario.
She said the World Bank was looking at how it could support the region financially to deal with the crisis.
Inflation, which moderated in 2025, is forecast to rise again, with the median rate across the Pacific economies expected to reach 4.5% in 2026, up from 3.4% in 2025.
The World Bank said fiscal balances weakened across most of the region in 2025 as governments maintained spending to support growth, delaying efforts to rebuild buffers after the pandemic. Public debt has continued to decline modestly, but several countries remain at high risk of debt distress.
The report said the Pacific’s longer-term challenge was that growth was not creating enough jobs, particularly for young people and women.
Vashakmadze said the focus needed to be on policies that help people to upgrade their skills, as well as identifying fast-growing sectors and removing barriers for further growth to drive job creation, especially for youth and women.
(Reporting by Lucy Craymer)
Comments