ADB sees developing Asia-Pacific inflation at 4.2% in 2026
ADB says some Asian economies may tighten policy further in 2026, with rate cuts in 2027 depending on inflation, growth and external risks.
The Asian Development Bank (ADB) forecasts inflation of 4.2% in developing Asia and the Pacific in 2026, warning in an outlook released on Wednesday (September 23) that wars in Europe and the Middle East and a severe El Niño are adding to price pressures.
ADB said further monetary tightening remained possible in several economies this year if inflation stayed high, while declining price pressures could allow policymakers to consider interest rate cuts in 2027.
Developing Asia-Pacific inflation to exceed 2025 levels
ADB expects regional inflation to ease to 3.5% in 2027 from 4.2% in 2026. Both forecasts remain above the 3% recorded in 2025, pointing to continued price pressures even as the annual inflation rate moderates.
Economic growth in developing Asia and the Pacific is forecast to slow to 5% in 2026 from 5.5% in 2025, according to ADB.
ADB has also raised its oil price forecasts to US$90 per barrel for 2026 and US$78 for 2027, reflecting the pressure on energy markets from the conflicts.
Wars and El Niño disrupt energy and food supplies
Renewed fighting in Iran and the conflict’s expansion to Yemen have interrupted supplies of crude oil and petroleum products, ADB said. The Russia-Ukraine war has also disrupted grain shipments.
El Niño-related weather disruption is affecting agricultural output from India to Thailand and reducing hydropower generation, according to ADB. The outlook also identifies restrictions on navigation through waterways such as the Panama Canal.
“Risks remain tilted to the downside,” Albert Park, ADB’s chief economist, wrote, warning that further conflict or worse-than-expected effects from El Niño could undermine growth and drive inflation higher.
Broad subsidies have softened the impact of expensive energy on consumers in 2026, but higher costs are feeding through to the wider economy, ADB said. The resulting pressure is expected to be greatest in economies where food carries a large weight in the consumption basket, particularly in South Asia.
Six Asian economies could tighten monetary policy further
Bangladesh, India, Indonesia, Pakistan, the Philippines and Vietnam are among the economies where further monetary tightening remains possible in 2026 if inflation stays elevated, according to ADB.
ADB said policymakers could begin considering rate reductions in 2027 as inflation declines, with policy rates expected to move gradually towards the levels prevailing before the escalation of the Middle East conflict.
The timing and size of monetary easing would depend on each economy’s inflation and growth outlook, alongside risks from external developments, ADB said.
