The Asian Development Bank (ADB) has significantly lowered its economic growth projections for developing Asia and the Pacific, citing the “systemic and long-lasting” impacts of the ongoing conflict in the Middle East.
In a special update released on Wednesday, April 29, the Manila-based lender cut its regional growth forecast to 4.7% for 2026 and 4.8% for 2027. These figures are a sharp retreat from the 5.1% growth previously estimated in the Asian Development Outlook released just weeks earlier on April 10.
The revision signals that the crisis is exerting a deeper and more persistent drag on the region’s economy than initially modeled.
“We are confronting systemic, long-lasting disruptions to global energy and trade networks, not just temporary volatility,” ADB President Masato Kanda said in an official statement.
“ADB will remain an agile partner in protecting the region’s economy, tracking fast-moving risks, and moving with urgency to scale up our support.”
The downgrade comes as regional inflation is now expected to climb to 5.2% this year—a stark increase from the earlier 3.6% projection—before potentially cooling to 4.1% in 2027. The bank’s latest calculations assume oil prices will hover around $96 per barrel throughout 2026, nearly 40% higher than the pre-conflict average of $69.
The ADB warned that a further escalation in hostilities could trigger an even darker “downside scenario,” potentially slowing growth to 4.0% and sending inflation skyrocketing to 7.4%.
To navigate this volatility, the lender advised regional governments to prioritize economic stabilization over the artificial suppression of prices. Allowing a partial pass-through of energy costs, the bank argued, is essential to incentivize conservation and a transition to alternative fuels.
The bank further recommended that fiscal interventions remain “targeted and time-bound” to protect vulnerable households without distorting market signals.
Additionally, the ADB suggested practical demand-side measures, such as temperature regulations for air-conditioning and expanded public transport incentives, to curb the region’s overall energy appetite.