Region: Fuel price drop will not relieve fiscal pressure on households as inflation remains and El Niño develops

In early July, consumer fuel prices decreased in the Solomon Islands, Fiji, Tonga, and Samoa. On 16 June, inflation in Tonga was reported at 26% for transport and 25% for utilities, with similar inflationary pressures in Fiji reported on 29 June. On 8 July, the Asian Development Bank forecast that economic growth would reduce to 3.3% in 2026, from 4.2% in 2025. ADB noted that inflation will also increase due directly to pressures from the US–Iran conflict and that the South Pacific had the greatest impact across the Asia-Pacific from these pressures.

Assessment: While the fuel price drop signals a change in the month-on-month trend, prices remain above pre-US–Iran levels and overall inflation remains elevated. Increased prices on goods, transport, and utilities are likely to maintain pressure on households for the rest of 2026, affecting outer islands more acutely than capital areas, and will be compounded by the effects of El Niño as it continues to develop throughout 2026 and early 2027.

Sources: “Fuel Prices Fall Across Tonga as July Rates Take Effect,” Talanoa ‘o Tonga, 29 June 2026; “Inflation Rises to 7.9% in May as Transport and Housing Costs Surge,” Talanoa ‘o Tonga, 16 June 2026; Shalveen Chand, “Diesel and kerosene prices drop in July,” Samoa Observer, 1 July 2026; John Houanihau, “Fuel Prices Drop as July Rates Take Effect,” Island Sun, 3 July 2026; Riya Mala, “Rising Fuel Costs Burden Families,” FBC News, 29 June 2026; “Fuel and LPG Prices Drop for July,” Fiji One News, 30 June 2026; Asian Development Bank, Asian Development Outlook July 2026: A Fragile Outlook as Energy Market Disruptions Persist, 8 July 2026.