THE Asian Development Bank (ADB) has cut its growth outlook for developing Asia and the Pacific for 2026 and lifted its inflation forecast.
It has warned that prolonged disruption to energy markets from tensions in the Middle East is weighing more heavily on the region than expected.
In its latest Asian Development Outlook, released on Wednesday, the Manila, Philippines-based lender said it now expects developing Asia and the Pacific to grow 4.9 per cent in 2026, down from 5.5 per cent in 2025 and 0.2 percentage points below its April projection.
It left the 2027 forecast unchanged at 5.1per cent, saying activity should recover as pressure from the conflict eases.
Regional inflation is now seen at 4.3 per cent in 2026, up from 3.0 per cent in 2025 and 0.7 percentage points above the April forecast.
ADB said the conflict’s effects are spilling beyond energy into fertiliser markets, other commodities and supply chains, keeping price pressures elevated.
“Durable implementation of the framework agreement would help normalize global energy markets, but the pace of adjustment is highly uncertain with significant downside risks,” ADB Chief Economist Albert Park said in a statement.
“Economic growth in developing Asia and the Pacific remains resilient, but persistent headwinds caused by the conflict require a careful policy balance between supporting growth and containing inflation.”
ADB warned that any renewed escalation in the Middle East and prolonged geopolitical uncertainty could tighten energy markets further, lift risk premia and intensify inflation and external pressures.
It also flagged tighter global financial conditions, with higher sovereign bond yields and borrowing costs likely to widen fiscal deficits in some economies.
The bank said higher tariffs and persistent trade policy uncertainty could also slow activity, while rising fertiliser prices threaten farm output and food security.
Forecasts were trimmed for most subregions, except developing East Asia.
China’s growth outlook was unchanged at 4.6 per cent for 2026 and 4.5 per cent for 2027, supported by strong exports and infrastructure investment.
India’s growth forecast was cut to 6.6 per cent for 2026 from an earlier estimate, as higher energy costs weigh on domestic demand, though ADB kept its 2027 projection at 7.3 per cent.
Growth estimates were also lowered for Southeast Asia and the Pacific, reflecting weaker domestic demand and tourism, rising inflation and higher import costs.
