The Asian Development Bank or ADB on Thursday trimmed its economic growth forecast for developing Asia and the Pacific in 2026, warning that prolonged disruptions in global energy markets stemming from the Middle East conflict are weighing on the region’s recovery and stoking inflation.
The Manila-based lender now expects the region’s economy to expand 4.9% in 2026, down from 5.5% growth recorded in 2025 and 0.2 percentage points below its April projection. Growth is projected to hold steady at 5.1% in 2027, according to the bank’s latest Asian Development Outlook supplement.
Inflation across the region is expected to climb to 4.3% in 2026, up sharply from 3% in 2025 and 0.7 percentage points higher than the bank had forecast in April. Price pressures are expected to ease slightly to 3.4% in 2027 as energy markets gradually stabilize.
Albert Park, ADB’s chief economist, said the disruption in energy markets triggered by the Middle East conflict has proven more persistent than initially anticipated, spilling over into fertilizer costs, broader commodity prices and regional supply chains. While a framework agreement to de-escalate the conflict was signed in June, Park said the pace at which energy markets normalize remains highly uncertain, with risks skewed to the downside.
Policymakers across the region face a delicate balancing act, Park said, as they try to support economic growth while preventing inflation from becoming entrenched. Central banks that had been expected to ease monetary policy further in 2026 may now need to proceed more cautiously, analysts said, given the upward revision to price forecasts.
The world’s second-largest economy, China, is expected to grow 4.6% in 2026 and 4.5% in 2027, unchanged from the bank’s earlier projections, supported by resilient exports and continued infrastructure investment despite ongoing trade tensions with the United States.
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India’s growth forecast for 2026 was revised down to 6.6%, though the bank kept its 2027 projection unchanged at 7.3%, citing the South Asian giant’s relatively strong domestic demand as a buffer against external shocks. India remains the fastest-growing major economy in the region, even as it feels some pass-through effects from higher global energy and fertilizer prices.
Southeast Asian economies, along with several Pacific island nations, saw their growth forecasts trimmed as well, reflecting softer external demand, a slower rebound in tourism revenue and higher import costs tied to energy prices. The bank did not break out country-specific figures for all Southeast Asian markets in Thursday’s release but noted that export-dependent economies in the subregion are particularly exposed to the tariff uncertainty still hanging over global trade.
Beyond the energy shock, the ADB flagged several additional risks to its outlook, including tighter global financial conditions, rising sovereign bond yields and borrowing costs, and widening fiscal deficits in several developing economies. The bank also pointed to persistent uncertainty around trade tariffs as a drag on investment decisions across export-oriented manufacturing hubs, a concern that has repeatedly surfaced in the bank’s outlooks over the past year.
Food security also featured prominently in the bank’s risk assessment, with officials warning that sustained fertilizer price increases linked to the energy crisis could push up agricultural input costs and, in turn, food prices for households already grappling with elevated inflation.
The ADB’s growth and inflation forecasts are closely watched by investors, policymakers and multilateral lenders as a benchmark for the region’s economic health. Thursday’s downgrade adds to a string of cautious signals from international financial institutions this year, as the fallout from the Middle East energy crisis continues to ripple through global supply chains months after the initial shock.
The bank said it would continue to monitor energy market developments closely and could revise its projections further depending on how quickly the framework agreement translates into a durable de-escalation.