ADB Cuts Developing Asia Growth Outlook

(RTTNews) - The Asian Development Bank downgraded its growth outlook for developing Asia and the Pacific citing higher energy costs, supply disruptions and tighter financial conditions following the Middle East conflict.

In the July Asian Development Outlook, the ADB forecast developing Asia and the Pacific to grow 4.9 percent this year, which was slower than the 5.1 percent expansion estimated in April.

However, the outlook for next year was maintained at 5.1 percent.

Due to higher energy prices passing through to food and other costs, inflation is projected to increase further. Price pressures are forecast to remain elevated for some time, even as oil prices ease.

Inflation outlook for this year was upgraded to 4.3 percent from 3.6 percent. The bank retained its inflation forecast for 2027 at 3.4 percent.

The Manila-based bank cited that re-escalation of the Middle East conflict and prolonged energy market uncertainties are key threats to the outlook.

The growth forecast for developing East Asia was kept unchanged at 4.6 percent in 2026 and 4.5 percent in 2027 despite weak private consumption and rising geopolitical risks. The growth in the region was underpinned by resilient exports and continued infrastructure investment in China.

China's growth projection for both this year and next were also maintained at 4.6 percent and 4.5 percent, respectively.

Meanwhile, the ADB downgraded South Asia's projection for this year to 6.0 percent and 6.7 percent in 2027, dampened by higher oil prices, rising freight costs and uncertainty over remittances stemming from the conflict.

The bank said India's growth outlook for FY2026 was trimmed to 6.6 percent from 6.9 percent as elevated energy prices squeezed real incomes. The projection for FY2027 was retained at 7.3 percent, underpinned by improved global conditions and export competitiveness.

Developing Southeast Asia's growth was revised down slightly to 4.6 percent in 2026 and maintained at 4.8 percent in 2027.

At the same time, the 2026 growth projection for the Pacific was lowered to 3.3 percent from 3.4 percent, while the 2027 projection was maintained at 3.2 percent.

Earlier, the International Monetary Fund trimmed global growth for this year to 3.0 percent from 3.1 percent. Growth was projected at 3.4 percent in 2027.

Meanwhile, inflation forecast was lifted to 4.7 percent from 4.4 percent this year. It is expected to ease to 3.9 percent in 2027.

The IMF said the war shock is weighing on energy importers and vulnerable economies, while AI-driven demand is lifting countries integrated into the global technology value chain.