ADB Warns Middle East Conflict Threatens Global Growth as MDBs Launch Coordinated Economic Response

Kanda’s remarks followed the release of a joint statement issued on 18 May by seven major multilateral development banks pledging support for countries affected by the Middle East conflict.

Asian Development Bank (ADB) President Masato Kanda has warned that the escalating conflict in the Middle East could seriously undermine economic stability, inflation control, and development progress across vulnerable countries, as multilateral development banks (MDBs) move to coordinate emergency support measures.

Speaking to G7 finance ministers and central bank governors in Paris, Kanda said international financial institutions are working together to help countries manage the growing economic fallout from the crisis through financing, policy support, trade assistance, and private-sector investment mechanisms.

Kanda addressed the meeting in his capacity as Chair of the Multilateral Development Banks Heads Group, emphasizing that rapid and coordinated global action is necessary to prevent long-term economic damage.

MDBs Unite to Respond to Middle East Crisis

Kanda's remarks followed the release of a joint statement issued on 18 May by seven major multilateral development banks pledging support for countries affected by the Middle East conflict.

The institutions said they are responding to requests from governments and development partners facing rising economic pressures linked to the ongoing instability.

According to the statement, MDBs are uniquely positioned to help countries:

• Manage economic shocks

• Preserve development gains

• Maintain essential services

• Protect vulnerable populations

• Strengthen long-term economic resilience

The coordinated response aims to deliver both immediate financial relief and medium-term recovery support for economies facing disruptions to trade, energy supplies, inflation control, and food security.

Kanda Warns Development Losses Can Be Difficult to Reverse

Masato Kanda stressed that prolonged crises can erase years of economic and social progress, particularly in developing economies already dealing with debt pressures, climate risks, and fragile growth conditions.

"Development setbacks are hard to reverse," Kanda said during the G7 discussions.

He warned that delayed international responses could worsen inflation, increase poverty, and undermine economic stability across multiple regions.

According to Kanda, early intervention and international coordination are essential to containing the wider consequences of geopolitical instability.

ADB Downgrades Asia-Pacific Growth Forecast

The Asian Development Bank has already revised its economic outlook for developing Asia and the Pacific in response to worsening global conditions linked to the Middle East conflict.

ADB now expects regional economic growth to slow to:

• 4.7 percent in 2026

• Down from 5.4 percent in 2025

At the same time, inflation is forecast to rise significantly:

• Inflation projected at 5.2 percent

• Up from 3.0 percent last year

The Bank also outlined a more severe downside scenario involving a prolonged conflict.

Under that scenario:

• Regional growth could slow further to 4.2 percent

• Inflation could surge to 7.4 percent

The projections reflect concerns about rising energy prices, supply chain disruptions, trade instability, and food insecurity stemming from geopolitical tensions.

Rising Energy and Food Costs Driving Economic Risks

The Middle East remains one of the world's most critical energy-producing regions, and instability there has already begun affecting global markets.

ADB officials warned that higher fuel prices and disruptions to shipping and supply chains could increase costs across developing economies, particularly those heavily dependent on imported energy and agricultural products.

The conflict could also intensify existing economic pressures caused by:

• Global inflation

• High interest rates

• Slowing international trade

• Climate-related disruptions

• Debt vulnerabilities

Many developing countries across Asia and the Pacific remain highly exposed to external economic shocks because of their dependence on imported fuel, fertilizer, and food supplies.

ADB Expands Emergency Financial Support

Kanda said the ADB is already deploying multiple financing tools to help member countries stabilize their economies and maintain essential services.

ADB's response measures include:

Fast-Disbursing Budget Support

Rapid financing mechanisms are being used to help governments address urgent fiscal pressures and sustain public services.

Countercyclical Financing

ADB is providing countercyclical support to help countries manage economic downturns and maintain economic stability during external shocks.

Trade and Supply Chain Finance

The Bank is expanding financing for trade and supply chains to reduce disruptions in the movement of essential goods and commodities.

Rapid Additional Financing

ADB is also offering accelerated financing packages to address emerging economic and social needs linked to the conflict.

Kanda said the support is intended to help countries:

• Stabilize economies

• Maintain energy supplies

• Secure agricultural inputs

• Preserve essential public services

• Protect vulnerable populations

MDBs Push for Greater Coordination

During the G7 session on international partnerships, Kanda also highlighted broader efforts by MDBs to improve cooperation and reduce duplication across development financing.

He said development banks are increasingly aligning around shared goals including:

• Job creation

• Water security

• Critical minerals supply chains

• Infrastructure development

• Climate resilience

MDBs are also working to mobilize larger volumes of private capital to support development and recovery efforts.

ADB and World Bank Launch Landmark Cooperation Framework

Kanda pointed to the newly established Full Mutual Reliance Framework between ADB and the World Bank as a major example of enhanced coordination among multilateral lenders.

The arrangement is described as the first framework of its kind between MDBs.

The initiative aims to:

• Reduce duplication

• Lower transaction costs

• Simplify project implementation

• Improve efficiency for borrowing countries

Officials believe stronger cooperation between development banks can accelerate project delivery and improve the effectiveness of international financing.

Global Economic Uncertainty Increasing

The warnings from ADB come amid broader concerns that geopolitical instability could weaken global economic recovery.

Rising tensions in the Middle East have already contributed to volatility in:

• Oil prices

• Commodity markets

• Shipping routes

• Financial markets

Economists warn that prolonged disruptions could place additional pressure on developing economies already struggling with inflation, debt burdens, and climate-related economic shocks.

MDBs say coordinated international support will be critical to preventing wider economic instability and protecting vulnerable countries from long-term development setbacks.

Focus on Resilience and Long-Term Stability

Despite the immediate challenges, Kanda emphasized that MDBs remain committed to helping countries build stronger and more resilient economies over the long term.

The coordinated response aims not only to manage the current crisis but also to strengthen economic systems against future global shocks.

ADB and its partners say continued collaboration between governments, development institutions, and private investors will be essential to sustaining growth, protecting livelihoods, and preserving development progress across vulnerable regions.