SYDNEY, May 12, 2026 (BSS/AFP) - Pacific Island countries face a drop in economic growth in 2026 as remote nations reliant on tourism and imported diesel suffer shocks from the Middle East war, the World Bank said Tuesday.

Around 90 percent of electricity generation in the Pacific Islands depends on diesel, with oil imports making up to 25 percent of merchandise imported to the region, the World Bank said in a quarterly update in Suva.

The World Bank has urged Pacific Island countries to focus on local job creation, particularly for youth, to break a cycle where external shocks continue to derail economies.

Growth in eleven island nations monitored by the World Bank has slowed to 3.2 percent in 2024-25, down from 6.5 percent in 2023, it said.

It now expected economic growth to fall to below three percent in 2026.

"Turbulence has become the new normal, with shocks transmitting rapidly to small island economies acutely exposed to forces far beyond their control," the report said.

"Growth this decade is expected to remain below the pace of the 2010s, insufficient to return incomes to their pre-pandemic trajectory."

The slowdown was led by Fiji as tourism fell, while the Solomon Islands saw its logging industry decline.

Workers in Australia and New Zealand sending money home had become an essential income source for Pacific households.

However island states needed to create local jobs and build essential services such as water, energy, transport and digital connectivity to increase resilience from repeated natural disasters and "external turbulence", the bank said.

Only around half of working age adults are employed, and nearly 20 percent of youth are not in education, employment, or training, it said.

Improving water services, for example, would create jobs, support tourism and improve health, the report recommended.

Despite high rainfall access to fresh water varies widely.

On steep volcanic islands, about 70-80 percent of rainfall is rapidly lost to runoff, limiting dry-season reliability. Disasters also frequently disrupt water supply.

Poor sanitation is a cause of absenteeism from work, and stunted growth among children, the World Bank said.