Papua New Guinea’s central bank has upgraded its economic growth forecast for 2026 to 3.5 per cent, supported by stronger resources, construction and services activity, while warning that El Niño and higher global costs could weigh on the economy next year.
The Bank of Papua New Guinea has revised upwards its forecast for real GDP growth in 2026, from 3 per cent in its March outlook to 3.5 per cent in September.
Governor Elizabeth Genia said stronger mineral production, continued construction and infrastructure activity, and improved performance across parts of the services sector had supported the upgrade.
Higher production of gold, silver, nickel and LNG has strengthened the resources sector, while communications, wholesale and retail trade, finance and infrastructure projects are contributing to activity elsewhere in the economy.
However, BPNG expects growth to moderate to around 2 per cent in 2027 before recovering to around 3 per cent in 2028.
The Bank said the softer outlook reflected higher input costs and the expected effects of a developing El Niño weather pattern, particularly on agriculture. Prolonged dry conditions could also affect water supplies, transport and power generation.
BPNG stressed that its forecasts do not incorporate the full impact of major new resource projects. If these projects proceed and come on stream, they could lift medium-term growth above current projections.
Inflation is another concern. Annual headline inflation rose to 5.3 per cent in the June quarter, up sharply from 2.2 per cent in March, driven largely by food and energy prices and imported costs.
The Bank now forecasts headline inflation of around 5 per cent for 2026 and 6 per cent in 2027 before easing to about 4.5 per cent in 2028.
BPNG has also modelled a more severe El Niño scenario, broadly based on the 1997 event, under which growth could fall to around 0.4 per cent in 2027 and inflation rise substantially higher.
For businesses, the outlook therefore presents a mixed picture: continued strength in resources, construction and infrastructure, alongside growing risks from weather, energy and freight costs and uneven growth in the wider non-mineral economy.
