In its Asian Development Outlook (ADO) released Wednesday, July 23, ADB now projects the region’s economies to grow by 4.7 percent this year, down from the 4.9 percent forecast issued in April. The outlook for 2026 has also been revised down to 4.6 percent from 4.7 percent.
Trade tensions and tariffs weigh on outlook
“Asia and the Pacific has weathered an increasingly challenging external environment this year,” said ADB chief economist Albert Park. “But the economic outlook has weakened amid intensifying risks and global uncertainty. Economies in the region should continue strengthening their fundamentals and promoting open trade and regional integration to support investment, employment, and growth.”
Risks to the outlook include a potential escalation in U.S. tariffs and ongoing trade tensions, geopolitical conflicts that could disrupt supply chains and raise energy prices, and further deterioration in the property market of the People’s Republic of China (PRC).
China holds steady, India faces slower growth
Despite these headwinds, growth in the PRC is expected to remain steady at 4.7 percent this year and 4.3 percent next year, as policy stimulus for consumption and industrial activity helps counterbalance a cooling property sector and weak exports.
India, the region’s second-largest economy, is forecast to grow 6.5 percent this year and 6.7 percent in 2026, both slightly lower than earlier projections. ADB attributes the revision to heightened trade uncertainty and higher U.S. tariffs affecting exports and investment sentiment.
Southeast Asia hit hardest by downgrade
Southeast Asia is expected to be the most affected subregion, with growth now projected at 4.2 percent this year and 4.3 percent next year—down roughly 0.5 percentage points from earlier forecasts.
Conversely, the Caucasus and Central Asia region received an upward revision. ADB raised its growth forecast for the subregion by 0.1 percentage point for both years, projecting 5.5 percent in 2025 and 5.1 percent in 2026, largely due to stronger oil production expectations.
Meanwhile, inflation across developing Asia and the Pacific is seen easing to 2.0 percent this year and 2.1 percent next year, helped by declining oil prices and strong agricultural output. —Ed: Corrie S. Narisma
