MANILA, PHILIPPINES — The Asian Development Bank (ADB) has revised its growth predictions for the economies of developing Asia and the Pacific, lowering the estimate for 2026 to 4.9%, down from 5.5% in 2025. This adjustment marks a 0.2 percentage point decrease from the forecasts made in April.
The ADB attributes the dimmer outlook to ongoing disruptions in energy markets driven by the conflict in the Middle East, which have had a more significant impact on the region’s economic prospects than previously expected. The bank’s latest economic forecast, released today, maintains a 2027 growth estimate of 5.1%, indicating a rebound in activity as these pressures begin to alleviate.
According to the Asian Development Outlook (ADO) for July 2026, the recovery of global energy markets is anticipated to be gradual, despite a framework agreement established in June. The repercussions of these disruptions extend beyond energy, affecting fertilizer prices, other commodities, and supply chains, which are expected to sustain inflationary pressures.
The regional inflation rate is now projected to reach 4.3% for this year, an increase from the 3% anticipated for 2025, representing an upward adjustment of 0.7 percentage points from the previous April forecasts. The inflation expectation for 2027 remains unchanged at 3.4%.
ADB Chief Economist Albert Park remarked, “The effective implementation of the framework agreement could facilitate the normalization of global energy markets; however, the speed of this adjustment carries considerable uncertainty and notable downside risks.” He added that while economic growth in the developing Asia and Pacific region continues to show resilience, ongoing challenges from the conflict necessitate a careful approach to balancing growth support with inflation containment.
The ADO July 2026 report further cautions that renewed escalations in conflict and persistent geopolitical instability constitute significant risks to the region’s economic outlook. Such developments could exacerbate pressures on energy markets, increase risk premiums, and intensify inflationary and external challenges.
Additionally, tightening global financial conditions present further risks, with rising sovereign bond yields and borrowing costs, alongside expected widening fiscal deficits in several economies. Increased tariffs and heightened uncertainty surrounding trade policies may also hinder economic activity, while surging fertilizer prices pose threats to agricultural productivity and food security.
Growth forecasts for 2026 have been reduced across most subregions, with the exception of developing East Asia. The projections for the People’s Republic of China remain steady at 4.6% for 2026 and 4.5% for 2027, bolstered by robust exports and infrastructure investment. In contrast, India’s growth forecast has been adjusted down to 6.6% for this year, impacted by rising energy costs affecting domestic demand, while it is held steady at 7.3% for the following year. Similarly, growth estimates for Southeast Asia and the Pacific have been downgraded, reflecting weaker domestic demand, challenges in tourism, rising inflation, and increased import expenses.
