📈 ADB Downgrades Asia-Pacific Growth as Middle East Conflict Deepens

The Asian Development Bank (ADB) has sharply revised its economic forecasts for developing Asia, citing prolonged Middle East disruptions that have spiked energy costs and tightened global financial conditions. • Growth Outlook: Regional growth is now projected at 4.7% for 2026 and 4.8% for 2027, down from the previous 5.1% forecast. Under a "severe downside scenario," growth could plummet to 4.2%. • Inflationary Pressures: Inflation is expected to accelerate to 5.2% this year (up from 3% in 2025). Oil prices are anticipated to average US$ 96 per barrel in 2026, significantly higher than the pre-conflict average of US$ 69. • Impact on Vulnerable Economies: The revision specifically warns of heightened risks for nations like Sri Lanka that are heavily dependent on imported fuel, tourism, and external financing. Persistent pressure on trade networks and remittances remains a systemic threat. • Policy Recommendations: • Shift from broad subsidies to targeted fiscal support for vulnerable households. • Allow partial pass-through of energy prices to encourage conservation. • Central banks to focus on liquidity and inflation expectations without aggressive tightening that stifles growth. • Implement demand-side measures such as peak-hour electricity saving and incentivizing public transport. _Note: Forecasts are based on ADB special update as of May 2026._