Growth in developing Asia and the Pacific is expected to slow this year as the conflict in the Middle East disrupts trade and energy markets, the Asian Development Bank said on Friday, with the extent of the slowdown dependent on how long the crisis persists.
ADB President Masato Kanda described the crisis as a “formidable test” for the region’s economic ascent, saying the war has injected new uncertainty into an already fragile global landscape.
Regional growth could ease to 4.7% in 2026 from 5.4% last year, while inflation could rise to 5.6% from 3.0% in 2025, if hostilities persist through the third quarter of this year, the ADB said in its latest Asia Development Outlook.
If the conflict drags on for a year, the region could lose about 1.3 percentage points of growth over 2026 and 2027, the ADB said.
Developing Asia and the Pacific comprises 43 economies, ranging from China and India to Georgia and Samoa, but excluding Australia, Japan, New Zealand, Singapore, and South Korea.
The estimates contrast with the report’s baseline assumptions, which were finalised on March 10 and were based on a shorter one-month conflict.
Under that scenario, growth is expected to slow only modestly to 5.1% in 2026 and 2027, with inflation projected to rise to 3.6% this year, before easing to 3.4% in 2027.
“Scenario analysis in this report focuses on the risk that the Middle East conflict and related energy disruptions last longer than in the early stabilisation scenario, which now appears quite likely,” ADB Chief Economist Albert Park told a press conference.
FRAGILE CEASEFIRE MIGHT NOT HOLD, ADB’S PARK WARNS
U.S. President Donald Trump had described the war as a brief, four‑week campaign following U.S. and Israeli strikes on Iran on February 28, but it dragged on into a sixth week of fighting.
The escalation continued until Trump agreed on Wednesday to a two‑week ceasefire with Tehran, just hours before a deadline imposed by the U.S. President urging Iran to reopen the Strait of Hormuz or face sweeping attacks on its civilian infrastructure.
The war has spread across much of the Middle East, killing thousands of people and triggering one of the most severe disruptions to global energy supplies in decades, with the world economy battered by surging oil and gas prices and mounting inflation fears.
A temporary halt in fighting and the reopening of Hormuz, the narrow waterway that typically handles about one-fifth of global oil trade, would allow Middle Eastern exporters to ship significant volumes of oil that have been trapped inside the Gulf since hostilities began.
“The ceasefire seems fairly fragile, and prediction markets are not putting a high probability that it is going to last,” Park said, making it difficult to forecast whether it would materially improve the growth outlook.
“Policy priorities should be to contain inflation and financial stress in the short term, while accelerating energy diversification and efficiency to reduce future vulnerability,” Park said.
Source: Reuters
--Agencies
