(April 10): Economic growth across Asia will likely slow even if oil prices stabilise in the coming months, as the impact of war in the Middle East ripples through industries from manufacturing to tourism, according to the Asian Development Bank (ADB).
The US and Israeli war on Iran is projected to halt developing Asia’s economic upswing, with the region’s gross domestic product expansion seen moderating to 5.1% this year from 5.4% in 2025, the ADB said in its Asian Development Outlook report released Friday.
The report’s projections were finalised more than a week into the Iran war, which started Feb 28, and assume a scenario where oil prices will gradually normalise and move toward pre-war levels by year-end. The situation remains volatile, with oil prices whipsawing on daily developments in the conflict.
“Developing Asia and the Pacific’s economic ascent faces a formidable test,” ADB president Masato Kanda said in the report. “While the region’s direct exposure is limited, it remains vulnerable to rising prices for energy and other commodities, which fan inflation and tighten financial conditions.”
The Manila-based lender forecasts China’s growth will ease to 4.6% this year from 5% in 2025, with private consumption seen remaining subdued in Asia’s largest economy.
See also: World Bank able to rush at least US$20 bil in post-war support
India’s economic growth is also projected to decline to 6.9% in 2026 from last year’s 7.6% due to external headwinds, though it should get support from resilient consumption. Developing Southeast Asia’s expansion is forecast to be broadly steady, according to the ADB, which reclassified some economies as advanced, instead of developing.
The ADB sees growth in advanced economies in Asia and the Pacific ebbing from 2.5% last year to 2.2% in 2026, due to slowdowns in Hong Kong, Japan, Singapore and Taiwan. It also sees inflation in developing Asia accelerating to 3.6% this year from 3% in 2025, driven mainly by higher energy prices. Farm production costs and food prices are expected to rise as the region relies on the Middle East for supplies of fertilisers and other related inputs, including urea and ammonia.
The Iran war will also likely hit semiconductor output, amid disruptions in the shipments of key inputs for chip manufacturing like helium, sulphur and petrochemical products, according to the ADB. Tourism-dependent economies will likewise feel the drag after the war upended global travel, it added.
See also: Hormuz traffic still blocked as Iran tries to formalise control
Despite the war posing downside risks to Asian economies, the lender cautioned against aggressive monetary policy tightening and price controls.
“Where support is needed, targeted and time-bound fiscal measures should be preferred,” the ADB said. “Monetary policy should focus on targeted liquidity provision and anchoring inflation expectations through effective communication, rather than aggressive tightening.”
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