ASIATODAY.ID MANILA — A prolonged conflict in the Middle East is no longer just a geopolitical crisis—it is fast becoming a major threat to economic stability across Asia and the Pacific.
New research from the Asian Development Bank (ADB) warns that regional growth could be cut by up to 1.3 percentage points, while inflation may surge by 3.2 percentage points if energy market disruptions persist for more than a year.
The shockwaves are already spreading: rising energy prices, disrupted supply chains, and tightening financial conditions are putting pressure on economies across the region. Tourism flows and remittances are also at risk of being dragged into the crisis.
According to the ADB brief, the scale of the impact will depend heavily on how long the conflict—and the resulting disruptions—lasts.
In a short-lived scenario, energy price pressures could ease relatively quickly. But in a prolonged crisis, Asia could face a dangerous double blow: weakening growth alongside persistently high inflation.
Developing economies in Southeast Asia and the Pacific are expected to bear the brunt of slowing growth, while inflationary pressures are projected to hit South Asia the hardest. With global uncertainty remaining high, ADB cautions that these projections should be interpreted carefully.
ADB Chief Economist Albert Park underscored the difficult trade-offs ahead.
“Prolonged energy disruptions could force economies in developing Asia and the Pacific to navigate a difficult trade-off between weaker growth and higher inflation,” he said on March 26, 2026.
How Governments Can Respond
ADB outlines four critical policy priorities to help economies navigate the crisis:
1. Let Price Signals Work
Rather than suppressing prices, governments should allow energy costs to rise—at least partially—to encourage conservation, fuel switching, and investment in alternative energy.
2. Targeted and Temporary Support
Fiscal measures should focus on vulnerable households and the most affected sectors, while remaining time-bound to avoid long-term fiscal strain.
3. Central Banks Must Stay Vigilant
Authorities should contain excessive market volatility without over-tightening policies that could worsen growth prospects.
4. Reduce Energy Demand
Practical measures—such as limiting air-conditioning use, cutting non-essential lighting, promoting public transport, and encouraging flexible work arrangements—can help ease energy pressure.
A Serious Wake-Up Call for Asia
ADB’s warning underscores a stark reality: the Middle East conflict is rapidly evolving into a global economic threat.
Without swift and well-calibrated responses, Asia and the Pacific could face one of the most dangerous economic scenarios—slowing growth combined with surging inflation. (AT Network)
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