In a special update to its economic forecasts, ADB now expects regional growth to slow to 4.7 percent this year and 4.8 percent next year, down from its earlier projection of 5.1 percent for both years.
Inflation is projected to accelerate to 5.2 percent in 2026 from 3.0 percent last year, before easing to 4.1 percent in 2027.
“Our revised outlook is a significant downward revision for growth and a sharp increase in inflation following a special update to reflect the deepening crisis,” said ADB President Masato Kanda in a statement.
“We are confronting systemic, long-lasting disruptions to global energy and trade networks, not just temporary volatility.”
Prolonged impact
The updated projections reflect growing evidence that the economic effects of the conflict are more persistent than initially expected.
Continued risks to energy production and transport routes, alongside sustained pressure on oil and gas prices, are dampening growth prospects and fueling inflation across the region.
Economies heavily reliant on imported fuel, remittances, tourism, or external financing are particularly vulnerable to these shocks.
ADB now assumes oil prices will average about $96 per barrel in 2026—well above the pre-conflict average of $69 earlier this year—before easing to around $80 per barrel in 2027.
Under a more severe downside scenario involving renewed escalation of the conflict, growth in the region could slow further to 4.2 percent this year and 4.0 percent next year, while inflation could spike to as high as 7.4 percent in 2026.
Policy response
In response, ADB outlined four key policy measures to help economies navigate the challenging environment.
First, governments are advised to focus on stabilizing markets rather than suppressing price signals.
Allowing higher energy prices to partially pass through can encourage conservation and investment in alternative energy sources, while broad subsidies risk distorting incentives.
Second, fiscal support should be targeted and time-bound, prioritizing vulnerable households and heavily affected industries to cushion the impact of rising prices without straining public finances.
Third, central banks should aim to limit excessive market volatility while closely monitoring inflation expectations.
While some policy tightening may be necessary, overly aggressive moves could further weaken growth and disrupt financial markets.
Finally, governments are encouraged to implement measures to curb energy demand, such as limiting air-conditioning use, promoting public transport, and encouraging flexible work arrangements.
Rising risks
ADB said it will continue to monitor rapidly evolving risks and scale up support to member economies as needed.
“As the crisis unfolds, the ability to respond quickly and effectively will be critical to safeguarding economic stability,” Kanda said. —Ed: Corrie S. Narisma
