ADB Forecasts Asia-Pacific Growth to Slow to 4.9% in 2026

The Asian Development Bank (ADB) has lowered its economic growth forecast for developing countries in Asia and the Pacific to 4.9% in 2026, down from 5.5% in 2025, due to the prolonged effects of turmoil from the war in the Middle East. This represents a further reduction of 0.2 percentage points from the April projection. Persistent energy market disruptions caused by the Middle East conflict are weighing more heavily on the region than previously anticipated, according to the latest economic outlook released by the ADB on 8 July. The growth forecast for 2027 is maintained at 5.1%, reflecting a recovery in economic activity once pressures ease. The Asian Development Outlook (ADO) July 2026 notes that improvements to global energy market disruptions are expected to occur only gradually, despite a framework agreement signed in June. Given that the conflict’s impact extends beyond energy to fertilisers, other commodity prices, and various supply chains, inflationary pressures are unlikely to abate soon. Inflation in Asia and the Pacific is now forecast at 4.3% this year, compared with 3% in 2025—an increase of 0.7 percentage points from the April estimate. The inflation forecast for 2027 remains at 3.4%. ADB Chief Economist Albert Park stated that if implemented smoothly, the framework agreement would help normalise global energy markets, but the speed of adjustment remains highly uncertain with significant downside risks. He added that economic growth in developing Asia-Pacific remains resilient, but prolonged conflict-related disruptions require a careful policy balance between supporting growth and containing inflation. The ADO July 2026 warns that a renewed escalation of the conflict and prolonged geopolitical uncertainty remain key risks to the regional outlook. These could further tighten energy markets, increase risk premiums, and worsen inflation and external pressures. Tighter global financial conditions bring additional risks, including rising sovereign bond yields and borrowing costs, as well as widening fiscal deficit projections in several economies. Higher tariffs and trade policy uncertainty could also dampen economic activity, while rising fertiliser prices continue to threaten agricultural production and food security. The 2026 growth projection has been lowered for most subregions, except for developing East Asia. The forecast for China is unchanged at 4.6% in 2026 and 4.5% in 2027, supported by strong exports and infrastructure investment. India’s growth forecast has been cut to 6.6% this year due to higher energy costs weighing on domestic demand, and is maintained at 7.3% for next year. Growth projections for Southeast Asia and the Pacific have also been trimmed, reflecting weaker domestic demand and tourism, rising inflation, and higher import costs.