Rahman said island nations are expected to largely sidestep the US's one percent tax on remittances. Photo: AFP/SERGIO PITAMITZ
The Asian Development Bank (ADB) is offering a sunny outlook on the Pacific economy, but with clouds on the horizon.
In its latest forecasts, the Bank puts economic growth at 4.1 percent regionwide, while projecting a dip in inflation.
But the region is expected to slow to 3.4 percent growth in 2026, as the United States tariffs begin to set in and revenue from tourism, fisheries and other important sectors take a hit.
ADB's lead economist for the Pacific region Aminur Rahman told Pacific Waves the region stands out from the rest of the world for its bump in growth this year.
He said unlike much of the developing world, the Pacific is relatively less reliant on US trade, dampening any direct pressure from the tariffs.
"We don't expect the direct effects of the tariff would be that prominent... but we tend to factor in that because of the tariff on some of the major trading partners of the Pacific countries, there may be indirect effects related to tourism in particular."
"If because of the tariff, the growth slows down in some of the countries that are the providers of tourism for the Pacific, the effect could boil down through that channel of indirect effect."
Rahman said island nations are expected to largely sidestep the US's one percent tax on remittances. Fiji, for example, is seeing remittances increase by 11.5 percent to F$692.6 million in the first half of 2025.
"We expect that effect also to be quite negligible, because the main destinations where Pacific labour goes are Australia and New Zealand, and obviously, the North Pacific countries have free access to the US."
PNG thriving, island nations vulnerable
It's an upward revision from ADB's April forecasts for 2025, which projected a flatter growth rate of 3.9 percent.
Rahman said this more optimistic forecast can be put down to record mineral and resource output from Papua New Guinea, propping up an otherwise subdued winter economy.
According to the report, PNG's economy is forecast to grow by 4.6 percent in 2025, slowing to 3.6 percent in 2026 as resource output eases.
Minerals, liquefied natural gas and cash crops dominate PNG's economic offering, Rahman said: particularly gold.
According to the report, the Porgera mine had its highest half-year gold output since reopening in 2023, while Lihir, K92 and Ok Tedi have far surpassed expectations.
"The gold price is very high currently, overall in the global market, and that certainly drove the positive outlook of the gold mines," Rahman said.
"Beside the gold, there is also a growth in LNG production that also contributed to the better-than-initially-estimated growth."
A supply increase for core PNG exports comes amid a 10 percent tariff from the US, much lower than many of its South-East Asian neighbours, making for a milder-than-expected impact, the report said.
Rahman acknowledged the size of PNG's economy relative to other island nations could obscure economic struggles regionwide.
Samoa, for example, is seeing visitor growth plummet, from 40.9 percent in 2024 to 2.8 percent in 2025.
Meanwhile, drier weather conditions could slow agricultural and fishing output in the South and Central Pacific, leading to greater reliance on imported food products, and weakening their offering for signature goods, like kava.
Less reliable revenue sources for Pacific governments are worsening delays to public infrastructure, with post-disaster reconstruction projects in Vanuatu significantly impacting overall growth rates.
"We see that, in some of the countries, there are still challenges for growth to pick up or catch up, even coming from recent disasters, project implementation or capacity constraint issues in some of the smaller Pacific countries, and so forth."
