ASIATODAY.ID, MANILA — Asia’s economic resilience is facing a new test as prolonged geopolitical tensions, global energy disruptions, and rising commodity costs reshape the region’s economic outlook for 2026.
The Asian Development Bank (ADB) has lowered its growth forecast for developing Asia and the Pacific to 4.9 percent in 2026, compared with its previous projection, following stronger-than-expected impacts from the ongoing Middle East conflict on energy markets, trade flows, and global supply chains.
The new projection represents a moderation from the region’s 5.5 percent growth in 2025. ADB expects growth to gradually recover to 5.1 percent in 2027 as energy market disruptions ease and economic activity improves.
In its latest Asian Development Outlook (ADO) July 2026, ADB warned that the global economy is entering a period of heightened uncertainty, with energy security, inflation control, and supply chain resilience becoming critical priorities for governments across Asia.
Energy Crisis Creates New Pressure on Asia
ADB said disruptions in global energy markets have become one of the biggest challenges confronting Asian economies in 2026.
The impact of the Middle East conflict has expanded beyond oil markets, affecting fertilizer prices, food production costs, transportation expenses, and manufacturing activities.
“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.
ADB noted that policymakers must carefully balance economic support measures with efforts to prevent inflationary pressures from becoming persistent.
Regional inflation is projected to rise to 4.3 percent in 2026, before easing to 3.4 percent in 2027.
Asia Remains Strong Despite Global Headwinds
Despite growing external pressures, ADB emphasized that developing Asia continues to demonstrate resilience.
Strong domestic demand, infrastructure investment, manufacturing capacity, and improving regional connectivity remain important foundations supporting growth.
However, the outlook faces several risks, including:
– renewed escalation of geopolitical tensions;
prolonged energy price volatility;
– higher global interest rates;
– increasing sovereign borrowing costs;
– trade policy uncertainty;
– rising fertilizer prices threatening food security.
Indonesia Maintains Growth Momentum in Southeast Asia
Southeast Asia is among the regions affected by global uncertainty, with ADB revising down its growth projection to 4.6 percent in 2026.
The adjustment reflects weaker external demand, higher import costs, and inflationary pressures linked to global energy disruptions.
However, Indonesia remains one of the region’s economies maintaining strong fundamentals.
ADB kept Indonesia’s growth forecast unchanged at 5.2 percent for both 2026 and 2027, supported by resilient domestic consumption, investment activity, infrastructure development, and its strategic role in global supply chain transformation.
Indonesia’s ability to maintain stable growth highlights the strength of its large domestic market and its growing importance as a regional economic hub amid shifting global trade patterns.
Across Southeast Asia, economic performances remain mixed:
– Vietnam continues to lead regional growth with projections of 7.2 percent in 2026 and 7 percent in 2027, supported by manufacturing, exports, and investment.
– Malaysia is projected to grow 4.6 percent in 2026.
– Thailand faces slower expansion at 1.8 percent.
– Philippines sees its forecast reduced to 3.8 percent amid weaker investment and higher commodity costs.
China and India Continue to Drive Regional Growth
Asia’s two largest economies remain central to the region’s economic outlook.
ADB maintained China’s growth forecast at 4.6 percent in 2026 and 4.5 percent in 2027, supported by exports and infrastructure investment.
However, weaker consumer confidence and challenges in the property sector remain key risks.
Meanwhile, India’s 2026 growth forecast was revised down to 6.6 percent due to higher energy costs affecting domestic demand.
India is expected to regain momentum in 2027 with growth projected at 7.3 percent, supported by stronger exports and improved global conditions.
Energy Security Becomes Strategic Priority for Asia
ADB’s special analysis highlighted that the 2026 Middle East conflict created one of the largest oil supply disruptions ever recorded.
However, oil prices avoided extreme historical levels due to high inventories, emergency stock releases, increased production outside the Middle East, alternative supply routes, and lower global energy intensity.
Despite this, ADB warned that energy markets could remain vulnerable as countries rebuild reserves and adjust to a more uncertain geopolitical landscape.
For Asia, strengthening energy security, diversifying supply chains, and accelerating the transition toward sustainable industries are becoming strategic priorities.
Asia’s Next Challenge: Sustaining Growth in an Uncertain World
ADB believes Asia-Pacific economies still possess strong economic foundations, but the changing global environment requires more adaptive and coordinated policies.
Governments across the region must maintain growth momentum while protecting households from inflationary pressures and strengthening resilience against future disruptions.
“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 said.
As Asia continues to shape the future of global economic growth, the region now faces a defining challenge: transforming uncertainty into resilience amid geopolitical shifts, energy disruption, and a rapidly changing global economic order. (AT Network)
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