ADB Forecasts Slower Asia-Pacific Growth in 2026 Amid Global Energy Crisis

The Asian Development Bank (ADB) said on Thursday that Pakistan’s economy expanded by 3.7 percent in fiscal year 2025–26, driven by robust growth in the industrial and services sectors, while the agriculture sector recorded modest gains that also contributed to the overall economic performance.

The Asian Development Bank (ADB) lowered its growth forecast for developing Asia and the Pacific economies to 4.9% for 2026 compared to 5.5% growth in 2025.

This is a reduction of 0.2 percentage points from April projections, according to ADB’s latest economic outlook released by the bank.

Prolonged disruptions to energy markets caused by the Middle East conflict have weighed more heavily on the region’s prospects than anticipated, says Asian Development Outlook (ADO) July 2026 adding the 2027 growth forecast is maintained at 5.1%, reflecting recovering activity as these pressures ease.

The outlook expects disruptions to global energy markets to unwind only gradually, despite a framework agreement signed in June.

With impacts extending beyond energy to fertilizers, other commodity prices, and supply chains, inflationary pressures are likely to persist. Regional inflation is now forecast at 4.3% this year compared to 3% in 2025—an upward revision of 0.7 percentage points from April. The inflation forecast for 2027 remains at 3.4%.

“Durable implementation of the framework agreement would help normalize global energy markets, but the pace of adjustment is highly uncertain with significant downside risks,” said ADB Chief Economist Albert Park.

 “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,” Albert Park added.

ADO July 2026 warns that renewed conflict escalation and prolonged geopolitical uncertainty remain key risks to the region’s outlook.

These could further tighten energy markets, raise risk premia, and intensify inflationary and external pressures.

Tighter global financial conditions pose additional risks, with sovereign bond yields and borrowing costs rising, and fiscal deficits projected to widen in several economies. Higher tariffs and elevated trade policy uncertainty could also weigh on activity, while rising fertilizer prices continue to threaten agricultural output and food security.

Growth projections for 2026 are lowered for most subregions, except developing East Asia. Forecasts for the People’s Republic of China are unchanged at 4.6% for 2026 and 4.5% for 2027, supported by strong exports and infrastructure investment. India’s growth forecast is revised down to 6.6% this year, as higher energy costs weigh on domestic demand, and maintained at 7.3% for next year.

Growth projections for Southeast Asia and the Pacific are also trimmed, reflecting weaker domestic demand and tourism, rising inflation, and higher import costs.