ADB cuts Asia growth forecast as Iran war sends energy shock across region

The Asian Development Bank (ADB) has lowered its economic growth forecast for Asia and the Pacific to 4.7% this year and 4.8% next year, down from its earlier projection of 5.1% for both years, as the war in the Middle East continues to weigh on the regional outlook.

ADB also raised its inflation forecast for Asia and the Pacific to 5.2% in 2026, up sharply from its earlier estimate of 3.6%.

ADB president Masato Kanda described the change as a “significant downward revision”, saying the conflict had pushed up energy prices, tightened financial conditions and put pressure on economic activity across the region. In a statement, he said Asia was facing “systemic, long-lasting disruptions to global energy and trade networks, not just temporary volatility.”

The bank warned that the shock was already feeding through to Asian economies and that a further escalation could produce even more severe damage. As an example, ADB said that if oil prices were to spike in May and remain elevated, growth in developing Asia and the Pacific could slow to 4.2% this year and 4.0% in 2027, while inflation could surge to 7.4% this year.

ADB said policymakers should respond carefully, urging central banks to focus on limiting excessive market volatility while keeping a close watch on inflation expectations.

Earlier this month, the International Monetary Fund also cut its 2026 global growth forecast to 3.1%, citing the impact of the Iran war.