The Asian Development Bank cautioned that the prolonged Middle East conflict is likely to impact economies across Asia in the coming years, with growth expected to decelerate to 5.1 percent in the region. There are concerns that if the conflict persists longer than anticipated, growth projections could drop further to 4.7 percent in 2026 and 4.8 percent in 2027, especially if the US-Israeli conflict with Iran extends into the third quarter.
The bank’s assessment indicated that many economies in developing Asia and the Pacific could face deteriorating growth prospects due to their status as net energy importers, making them more susceptible to the repercussions of the ongoing war. Albert Park, the ADB’s chief economist, highlighted the potential income losses from higher energy prices and the lingering impacts of supply chain disruptions, increased producer prices, and tighter financial conditions, which could prolong stagflationary pressures even after energy prices stabilize.
Moreover, a prolonged conflict in the Middle East could lead to a significant inflation spike of up to 5.6 percent, compared to the earlier predictions of 3.6 percent in 2026 and 3.4 percent in 2027 under an “early stabilisation scenario.” Park emphasized the broader consequences of Iran’s actions on shipping in the Strait of Hormuz, affecting not just fuel costs but also regional food security by raising agricultural expenses through high fertilizer and diesel prices, potentially causing food insecurity later in the year.
In response to the economic uncertainties, residents in Manila were seen lining up for a government initiative offering rice at a subsidized rate of 20 pesos (33 cents) per kilo. Additionally, the ADB report highlighted the negative impact of ongoing trade uncertainties, particularly stemming from US President Donald Trump’s tariff policies, which are likely to dampen regional investment prospects.
China, a significant player in the global economy, is projected to experience a growth slowdown to 4.6 percent this year and 4.5 percent next year, down from the previous five percent, due to persistent weaknesses in its property market and sluggish export growth trends, as outlined in the report.
