ADB predicts slowing Asia growth as Middle East war takes toll
Growth predictions could fall to as low as 4.7% for 2026 and 4.8% for 2027 should the US-Israeli war with Iran drag into the third quarter
The Middle East war is expected to drag on Asia's economies over this year and next, the Asian Development Bank warned today (10 April), as it predicted growth to slow to 5.1% across the world's most populous region.
That prediction could prove optimistic, however, if new evidence suggesting a "more prolonged conflict and more persistent disruptions" bears out, it said.
Growth predictions could fall to as low as 4.7% for 2026 and 4.8% for 2027 should the US-Israeli war with Iran drag into the third quarter.
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"Most economies in developing Asia and the Pacific will see their growth outlook worsen this year and in 2027," was the bank's stark assessment.
The region's status as a net energy importer left it particularly vulnerable to the war's fallout, Asian Development Bank chief economist Albert Park told reporters at an embargoed Thursday briefing.
"Higher energy prices can generate significant income losses," Park said.
"Even after energy prices normalise, supply-chain disruptions, higher producer prices and tighter financial conditions would prolong stagflationary pressures," he added.
A more drawn-out conflict in the Middle East could also see inflation spike by as much as 5.6%, the Asian Development Bank said today.
Completed in March, the bank's report had predicted price jumps of 3.6% in 2026 and 3.4% in 2027 under what it dubbed an "early stabilisation scenario".
Park noted that Iran's squeeze on shipping in the Strait of Hormuz had ripple effects far beyond the gas pump, including regional food security.
"Although rice prices still remain relatively low, high fertiliser and diesel prices raise agricultural costs, which could lead to less input use and lower yields later in the year, and that could contribute to food insecurity," Park said.
In Manila today, lines stretched around the block in some neighbourhoods as residents flocked to take advantage of a government-backed programme providing rice for just 20 pesos (33 cents) per kilo.
The new Asian Development Bank report also said continued trade uncertainty in the face of US President Donald Trump's tariff regime could be expected to weigh on regional investment.
Global powerhouse China was expected to see growth dip to 4.6% this year and 4.5% next, down from 5%, on the back of continued weakness in its property market and slower export growth, the report said.
