ADB Cuts Asia Growth Forecast as Energy Risks Weigh on Economy

ADB said the impact of higher energy prices has spread beyond fuel markets, affecting fertilizer costs, commodity prices and global supply chains.

The Asian Development Bank (ADB) has reduced its economic growth forecast for developing Asia and the Pacific in 2026, pointing to prolonged disruptions in global energy markets linked to the conflict in the Middle East. In its latest Asian Development Outlook (ADO) July 2026, the bank now expects the region to grow by 4.9% this year, down from its earlier projection of 5.1% made in April. The region recorded estimated growth of 5.5% in 2025, while the forecast for 2027 remains unchanged at 5.1%.

ADB said the impact of higher energy prices has spread beyond fuel markets, affecting fertilizer costs, commodity prices and global supply chains. These pressures have proved stronger and more persistent than expected, creating fresh challenges for governments trying to maintain economic growth while keeping inflation under control.

Chief Economist Albert Park said the regional economy continues to show resilience despite difficult global conditions, though policymakers now face the challenge of balancing measures that support growth without allowing inflation to become entrenched.

Higher inflation and global uncertainty add pressure

The report expects inflation across developing Asia and the Pacific to reach 4.3% in 2026, a sharp increase from 3% in 2025 and 0.7 percentage points higher than the forecast published in April. Inflation is expected to ease to 3.4% in 2027, provided global energy markets gradually stabilise.

ADB noted that although a framework agreement signed in June offers hope for easing tensions, it expects disruptions in energy markets to unwind only slowly. Continued geopolitical uncertainty could trigger further increases in energy prices, raise borrowing costs and place additional pressure on government finances.

The report also warned that higher tariffs, uncertain trade policies and tighter global financial conditions could weaken economic activity across the region. Rising fertilizer prices remain another concern because they threaten agricultural production and food security in many developing economies.

ADB said renewed conflict or prolonged geopolitical tensions could further disrupt trade, increase inflation and make it more expensive for governments and businesses to borrow, adding another layer of uncertainty to the regional outlook.

India's forecast reduced while China's outlook holds steady

Among the region's largest economies, China's growth outlook remains unchanged. ADB continues to forecast growth of 4.6% in 2026 and 4.5% in 2027, supported by strong exports and continued infrastructure investment. India's growth projection for 2026 has been lowered to 6.6%, reflecting the impact of higher energy costs on domestic demand. The forecast for 2027 remains unchanged at 7.3%, indicating expectations that economic activity will strengthen as current pressures begin to ease.

Growth forecasts have also been reduced for most other subregions, including Southeast Asia and the Pacific, where weaker domestic demand, softer tourism activity, rising inflation and higher import costs are expected to weigh on economic performance. ADB said the region still has a solid foundation for growth, though the pace of recovery will depend heavily on how global energy markets evolve and whether geopolitical tensions ease over the coming months.