In a special update to its economic forecasts, ADB has significantly downgraded its economic growth outlook and raised inflation projections for developing Asia and the Pacific as more severe and prolonged disruptions from the conflict in the Middle East continue to raise energy prices, tighten financial conditions, and weigh on economic activity across the region.
ADB cuts Asia-Pacific growth forecasts to 4.7 per cent (2026) and 4.8 per cent (2027) from 5.1 per cent, while raising inflation to 5.2 per cent before easing to 4.1 per cent.
This reflects prolonged Middle East conflict driving higher energy prices and tighter financial conditions.
In a severe escalation scenario, growth could drop to 4.2 per cent and inflation rise to 7.4 per cent in 2026.
The revised outlook reflects growing evidence that the economic effects of the conflict have lasted longer than initially anticipated. Continued risks to energy production and transport routes, alongside sustained pressure on oil and gas prices, are weakening growth prospects and raising inflation prospects—particularly for economies heavily dependent on imported fuel, remittances, tourism, or external financing, ADB said in a press release.
“Our revised outlook is a significant downward revision for growth and a sharp increase in inflation following a special update to reflect the deepening crisis,” said ADB president Masato Kanda. “We are confronting systemic, long-lasting disruptions to global energy and trade networks, not just temporary volatility. ADB will remain an agile partner in protecting the region’s economy; tracking fast-moving risks, and moving with urgency to scale up our support.”
The new outlook assumes that oil prices average around $96 per barrel in 2026—substantially above the pre-conflict average of $69 per barrel in January and February—before easing to around $80 per barrel in 2027.
Under an even more severe downside scenario of renewed conflict escalation, in which oil prices spike in May 2026 and remain even higher, growth in developing Asia and the Pacific could slow to 4.2 per cent this year and 4 per cent next year, while inflation could reach 7.4 per cent in 2026.
Fibre2Fashion News Desk (RR)
