The Asian Development Bank (ADB) has projected that economic growth in the developing regions of Asia and the Pacific will decelerate to 5.1% for both 2026 and 2027, down from 5.4% in the previous year. This decline is attributed to ongoing conflicts in the Middle East and persistent uncertainties surrounding trade. Additionally, regional inflation is expected to increase, reaching 3.6% in 2026 and 3.4% in 2027, compared to 3.0% last year.
The forecasts are based on assumptions established on March 10, amidst significant uncertainty, which anticipated an early stabilization in the Middle East. However, recent developments suggest that the risk of prolonged disruptions has increased.
Despite these challenges, the region remains in a relatively strong position, buoyed by robust domestic demand, stable labor markets, and increased public infrastructure investment, as highlighted in the Asian Development Outlook (ADO) for April 2026, released today.
According to ADB Chief Economist Albert Park, “The most significant risk to the region’s economic outlook stems from the potential for a prolonged Middle Eastern conflict, which could result in sustained high energy and food prices, along with tighter financial conditions.” He emphasized the necessity for governments to adopt prudent macroeconomic policies to promote growth and manage inflation, while also implementing targeted support for vulnerable households.
The ADO April 2026 reports on the impact of the ongoing conflict on regional economies under various scenarios. An extended and intensified conflict in the Middle East could disrupt economic activity through various channels, such as increased price pressures, shipping challenges, and financial instability.
Most economies within the developing Asia and Pacific regions are expected to see a deterioration in their growth forecasts for this year and 2027. This is occurring despite strong private consumption and solid demand for artificial intelligence-related products. Specifically, growth in the People’s Republic of China (PRC) is anticipated to fall to 4.6% this year and 4.5% next year, down from 5% last year, primarily due to ongoing weaknesses in the property market and a slowdown in export growth. In India, growth is predicted to decrease to 6.9% this year from 7.6% last year, before rebounding to 7.3% next year, supported by strong domestic consumption. The Pacific economies are forecasted to face the most significant slowdown, dropping from a growth rate of 4.2% in 2025 to 3.4% in 2026 and 3.2% in 2027.
In the near term, oil prices are expected to remain high but may stabilize if geopolitical tensions diminish. Recent increases in energy prices, along with potential disruptions in fertilizer supply linked to the Middle Eastern conflict, could exert inflationary pressure on global food prices.
The ADB is a prominent multilateral development bank dedicated to fostering sustainable, inclusive, and resilient growth across Asia and the Pacific. By collaborating with its members and partners, ADB addresses complex challenges through innovative financial instruments and strategic alliances, aiming to enhance lives, develop quality infrastructure, and protect the environment. Established in 1966, ADB comprises 69 members, with 50 from the region.
Source: Financial Chronicle Biz English | Sri Lanka Business News.
