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Middle East Conflict Slows Asia-Pacific Growth, Warns ADB Report

The Asian Development Bank warns that the ongoing Middle East conflict poses significant downside risks to economic growth in developing Asia and the Pacific. Under a prolonged disruption scenario, regional growth could slow to 4.7% in 2026, down from a baseline of 5.1%. Inflation is a major concern, potentially rising to 5.6% this year due to higher energy prices and production costs. The region remains highly vulnerable to spillovers through global energy markets, trade networks, and financial conditions despite limited direct trade exposure.

Key Points: ADB: Middle East Conflict Risks Asia-Pacific Growth, Inflation

  • Growth could slow to 4.7%
  • Inflation may spike to 5.6%
  • Energy prices are key risk
  • Trade and financial spillovers threaten region
2 min read

Middle East conflict challenges Asia-Pacific resilience: ADB

ADB report warns prolonged Middle East conflict could cut Asia-Pacific growth to 4.7% and spike inflation to 5.6%, threatening regional resilience.

"More persistent disruptions would push energy prices even higher, raising inflation and weighing further on growth across the region. - ADB Report"

Manila, April 10

The ongoing conflict in the Middle East has amplified global geopolitical risks and intensified downside risks for economic growth of developing Asia and the Pacific, according to a new report released by the Asian Development Bank on Friday.

The Asian Development Outlook April 2026 projected that under an early stabilization scenario, regional growth of developing Asia and the Pacific is expected to moderate to 5.1 per cent in both 2026 and 2027, from 5.4 per cent in 2025, Xinhua news agency reported.

However, if disruptions in the Middle East last through the third quarter of 2026, the growth could slow to 4.7 per cent in 2026 and 4.8 per cent in 2027.

Albert Park, ADB's chief economist, said higher energy prices will raise production costs and consumer prices, while export growth will normalize following last year's front-loading ahead of US tariff increases. He warned that more persistent disruptions would make the inflation situation even worse and weigh further on growth across the region.

According to ADB's forecast, under the early stabilization scenario, inflation is projected at 3.6 per cent in 2026 and 3.4 per cent in 2027, up from 3 per cent in 2025. However, if tensions in the Middle East last through the third quarter of 2026, inflation would rise to 5.6 per cent this year.

The report noted that despite having only modest direct trade exposure to Middle Eastern economies, developing Asia and the Pacific is highly vulnerable to spillovers transmitted through global energy markets, trade and transport networks, and financial conditions.

"The conflict in the Middle East has amplified global geopolitical risks. More persistent disruptions would push energy prices even higher, raising inflation and weighing further on growth across the region. In addition, an abrupt tightening in global financial conditions could raise borrowing costs. New tariff increases and trade policy uncertainty could also disrupt global supply chains and weaken external demand," the report stated.

- IANS

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Reader Comments

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Rohit P
The ADB report highlights a critical point. Even though our direct trade with the Middle East might be modest, we are deeply connected through energy. A 5.6% inflation scenario is scary. Hope for early stabilization, but we must prepare for the worst. Jai Hind 🇮🇳
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Arjun K
It's a globalized world. A fire far away can burn us here through supply chains and financial markets. This underscores the need for Asia-Pacific nations, including India, to strengthen regional cooperation and build more resilient, self-reliant economic systems. Atmanirbhar Bharat is more relevant than ever.
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Sarah B
Living in India for 5 years now. The resilience of the local economy is impressive, but external shocks like this are a real test. The projected growth slowdown from 5.4% to potentially 4.7% is significant. Hope diplomacy prevails for everyone's sake.
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Karthik V
While the report is important, I feel it's a bit too pessimistic. India has navigated global crises before. Our domestic demand is strong. Yes, there will be challenges, but I believe we can manage better than these projections suggest. Let's stay positive!
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Meera T
The human cost of the conflict is tragic, first and foremost. On the economic front, as a small business owner, I'm worried about rising input costs. If borrowing costs go up as the report warns, it will be a double whammy for MSMEs. Government support will be crucial.

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