ADB report: Growth of developing Asia-Pacific economies stymied by energy crisis

Asia-Pacific’s developing nations are expected to experience persisting impacts to their economies beyond energy to fertilizers, other commodity prices and supply chains, and inflationary pressures.

This is despite the agreement signed by the United States and Iran to end military operations and negotiate a final peace treaty within a 60-day timeframe in June.

Lower growth forecast

According to the Asian Development Bank (ADB), continued disruptions to energy markets brought about by the Middle East conflict have weighed more heavily on the Asia-Pacific region’s prospects than anticipated.

This month, the Asian Development Outlook lowered its growth forecast for developing Asia and the Pacific economies to 4.9%, down 0.2 percentage points from the previous ADO projection in April.

The growth projection for 2027 is unchanged at 5.1%, the report added.

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Asia-Pacific inflation climbs

The conflict in the Middle East also affected the inflation outlook in the Asia-Pacific region.

It is now expected to move up to 4.3% by the end of the year from 3.0% last year.

It signified an upward change of 0.7 percentage points from ADO’s projection in April and the inflation forecast for 2027 remains at 3.4%.

Renewed escalation of the conflict has prolonged geopolitical uncertainty in the region, the report said.

The issues become key risks for businesses in terms of economic prospects, causing the further tightening of energy markets, increasing risk premiums and amplifying inflationary pressures and external vulnerabilities.

The report further stated that the rising yields on sovereign bonds and financing costs and widening fiscal deficits across many economies are the challenges that the countries could experience once global financial conditions tighten.

Higher tariffs and elevated trade policy uncertainty could also weigh on activity, while rising fertilizer prices continue to threaten agricultural output and food security, it added.

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