Asian Development Bank Lowers Regional Growth Forecast to 4.7 Percent Amid Ongoing West Asian Disruptions

Asian Development Bank Downgrades Economic Growth Outlook for Asia and the Pacific

The Asian Development Bank (ADB) has revised its economic growth outlook for Asia and the Pacific, downgrading its projections to 4.7 per cent from 5.1 per cent earlier for the current year and 4.8 per cent for the next year. This downward revision is attributed to prolonged West Asia disruptions that are fuelling energy prices and tightening financial conditions across the region.

In a special update to its economic forecasts, the ADB has significantly raised inflation projections to 5.2 per cent in 2026 from 3.6 per cent earlier for the region. The revised outlook reflects growing evidence that the economic effects of the conflict have lasted longer than initially anticipated.

The ADB's forecast for regional growth is now 4.7 per cent for the current year and 4.8 per cent for the next year, down from 5.1 per cent for both years projected in its Asian Development Outlook (ADO) 2026 issued on April 10. Inflation in the region is projected to accelerate to 5.2 per cent this year before easing to 4.1 per cent in 2027.

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The revised outlook assumes that oil prices average around $96 per barrel in 2026, substantially above the pre-conflict average of $69 per barrel in January and February, before easing to around $80 per barrel in 2027.

Under an even more severe downside scenario of renewed conflict escalation, in which oil prices spike in May 2026 and remain even higher, growth in developing Asia and the Pacific could slow to 4.2 per cent this year and 4 per cent next year, while inflation could reach 7.4 per cent in 2026.

The ADB has suggested four key policy responses to meet the challenges posed by the conflict. These policies focus on stabilisation rather than suppression of price signals. Allowing higher energy prices to pass through, at least in part, can encourage energy conservation, fuel switching, and investment in alternative energy sources.

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The ADB has also recommended that governments curb energy demand where feasible through practical measures such as temperature mandates to limit air-conditioning, cuts to non-essential lighting, peak-hour electricity-saving campaigns, and work-from-home or staggered schedules. Incentivising public transport use and car-free days in urban areas on public holidays can also help reduce transport fuel use.