The Asian Development Bank (ADB) has lowered its growth forecast for developing Asia and the Pacific to 4.9 per cent in 2026, down from 5.5 per cent in 2025 and 0.2 percentage points below its April projection, citing the prolonged impact of conflict in the Middle East on global energy markets.
In its Asian Development Outlook (ADO) July 2026, released on July 9, 2026, the bank said the region's economic outlook had weakened as disruptions to energy supplies proved more persistent than previously expected.
ADB left its 2027 growth forecast unchanged at 5.1 per cent, saying activity should gradually recover as pressures on energy markets begin to ease.
The report said disruptions to global energy markets were expected to unwind only slowly despite a framework agreement signed in June. The effects have spread beyond fuel prices to fertilisers, other commodities and supply chains, adding to inflationary pressure across the region.
Regional inflation is now forecast to reach 4.3 per cent in 2026, up from 3.0 per cent in 2025 and 0.7 percentage points higher than the April forecast. The inflation outlook for 2027 remains unchanged at 3.4 per cent.
"Durable implementation of the framework agreement would help normalize global energy markets, but the pace of adjustment is highly uncertain with significant downside risks," ADB Chief Economist Albert Park said.
"Economic growth in developing Asia and the Pacific remains resilient, but persistent headwinds caused by the conflict require a careful policy balance between supporting growth and containing inflation."
The report warned that renewed fighting and prolonged geopolitical uncertainty remained the biggest threats to the regional outlook. Either could tighten energy markets further, increase risk premiums and intensify inflationary and external pressures.
ADB also cautioned that tighter global financial conditions could weigh on growth as sovereign borrowing costs rise and fiscal deficits widen in several economies. Higher tariffs, continued trade policy uncertainty and rising fertiliser prices could further undermine economic activity, agricultural production and food security.
The bank lowered its 2026 growth forecasts for most subregions, with developing East Asia the only exception.
Its forecasts for the People's Republic of China were unchanged at 4.6 per cent in 2026 and 4.5 per cent in 2027, supported by strong exports and infrastructure investment.
India's growth forecast for 2026 was cut to 6.6 per cent as higher energy costs are expected to weaken domestic demand, while its 2027 forecast was maintained at 7.3 per cent.
Growth forecasts for Southeast Asia and the Pacific were also revised lower, reflecting weaker domestic demand and tourism, rising inflation and higher import costs.