Growth in Developing Asia Could Slow Sharply on Mideast Conflict, ADB Says

By Amanda Lee

Persistent energy supply disruptions stemming from the Middle East conflict have prompted the Asian Development Bank to sharply downgrade its growth forecast for developing Asia and the Pacific.

These severe and prolonged disruptions are keeping energy prices elevated, tightening financial conditions and weighing on economic activity across the region, the multilateral bank said Wednesday.

The ADB now expects regional growth at 4.7% in 2026 and 4.8% in 2027, down from 5.1% for both years projected in its previous report earlier in April. Inflation across the region is also forecast to accelerate to 5.2% in 2026, from 3.0% last year, before easing to 4.1% in 2027.

"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.

Consumers are feeling the impact from the global energy shock, with fuel prices rising across most of Asia and the Pacific, the ADB said.

Increasing fertilizer prices could push up food inflation, particularly for economies that are most dependent on imports from the Middle East.

Continued risks to energy production and transport routes, as well as sustained upward pressure on oil and gas prices, are hurting growth prospects and raising inflation expectations, the ADB said.

The ADB's new outlook assumes that oil prices average around $96 a barrel in 2026--substantially higher than the pre-conflict average of $69 a barrel in January and February--before easing to around $80 a barrel in 2027.

Meanwhile, under an even more severe downside scenario of renewed conflict escalation, where oil prices rise in May and remain even higher, the ADB projects growth in developing Asia and the Pacific to slow further to 4.2% this year and 4.0% in 2027, while inflation could hit as high as 7.4% this year.

Central banks should focus on limiting excessive market volatility while keeping a close watch on inflation expectations, the ADB said.

"The priority should be to provide targeted liquidity support to preserve orderly market functioning," it added.

Write to Amanda Lee at amanda.lee@wsj.com

(END) Dow Jones Newswires

April 29, 2026 05:59 ET (09:59 GMT)