Higher fuel prices and developing El Nino pattern could quickly reshape Papua New Guinea’s economic outlook in the final months of 2026.
BSP Group General Manager-Corporate and Institutional Banking, Daniel Faunt warns that El Nino and higher fuel prices could reshape Papua New Guinea’s economic path ahead.
Mr. Faunt emphasized that El Nino facing PNG may shift expectations for taxes, spending and business activity in the country, while higher fuel costs provide the clearest link between geopolitics, the economy and broad market performance.
“In the medium term, we remain optimistic, " Mr. Faunt Stated. "There is a positive contribution to the PNG economy coming from the PNG Chiefs’ 2028 NRL entry and the K45 billion Papua LNG is processing towards a final investment decision.”
“In addition, a pipeline of other energy and mineral projects offers the prospect of another resources super cycle in PNG, which will create significant economic growth in the medium-term.”
According to the Q3 Economic Performance, one of the biggest concerns is the impact of higher oil prices, with crude trading above US$100 a barrel amid ongoing conflict in the Middle East.
The price surge is expected to drive energy costs for fuel-importing countries across the region, placing additional pressure on businesses and households.
It reports that inflation also remains a key challenge.
Highlighting rising fuel, freight and production costs are likely to filter through to the wider economy, while higher fertilizer and transport expenses are expected to push food prices higher in the coming months.
At the same time, the emerging El Niño weather pattern poses a significant threat to regional economies.
The report raises critical concerns that the risk is not only the direct impact of drought and changing weather conditions, but also how El Niño could amplify existing economic pressures, including elevated energy prices, commodity market volatility and persistent inflation.
PNG and other emerging economies in the Pacific may have limited policy options to respond should these challenges intensify, raising concerns about economic resilience in the months ahead.
Looking toward the first quarter of 2027, the regional outlook will depend largely on whether geopolitical tensions ease enough to bring down fuel prices and whether El Niño proves less severe than anticipated.
BSP made this warning after releasing its September Qutar 2026 Economic Pulse and added that businesses still have good reasons to remain cautiously positive.