News
01/05/26
ADB cuts Asian growth outlook on Mideast Gulf crisis
Singapore, 1 May (Argus) — The Asian Development Bank (ADB) has downgraded its
economic growth outlook and raised inflation forecasts for Asia-Pacific, as
prolonged disruptions caused by the US-Iran war continue to raise energy prices
and weigh on economic activity. The ADB is now forecasting regional growth of
4.7pc this year and 4.8pc in 2027, down from projections of 5.1pc for both years
made in its Asian Development Outlook April 2026 report. Inflation in the region
is now forecast to rise to 5.2pc this year from 3pc last year, before easing to
4.1pc in 2027. The ADB's previous forecast, released in April, was based on
assumptions finalised in early March, about a week after the war started, and
envisaged an early stabilisation of the conflict. The revised outlook takes into
account prolonged risks to energy production and transport routes, as well as
continued pressure on oil and gas prices. It assumes that spot Brent crude
prices will average around $96/bl in 2026 before easing to around $80/bl in
2027. This is substantially higher than pre-war levels of around $69/bl in
January and February. "We are confronting systemic, long-lasting disruptions to
global energy and trade networks, not just temporary volatility," said ADB's
president Masato Kanda. If the conflict escalates further and oil prices move
higher, growth in Asia-Pacific could slow further to 4.2pc this year and 4pc
next year, while inflation could hit 7.4pc this year, the ADB said. Crude
futures have risen strongly in recent days. The front-month June Brent contract
on the Ice exchange traded as high as $126.41/bl on 30 April , surging by over
7pc from the previous close. The new July contract traded at $110.35/bl at
3:30pm Singapore time (07:30 GMT) today. Brent futures were trading at around
$60-70/bl for most of January-February, before the war began. Demand reductions
Governments should focus on cutting energy demand where possible, the ADB said.
Some of the recommended measures, such as limiting air-conditioning and
encouraging working from home, have already been implemented in countries
including the Philippines and Singapore. Policies should also focus on
stabilisation, instead of the suppression of price signals, the ADB said.
"Allowing higher energy prices to pass through, at least in part, can encourage
energy conservation, fuel switching, and investment in alternative energy
sources," it said. Meanwhile, central banks should try to limit excessive market
volatility. Aggressive policy tightening could worsen growth headwinds and
exacerbate financial volatility. Some tightening may be warranted, "but
anchoring inflation expectations with effective central bank communication will
remain key," the ADB said. By Prethika Nair Send comments and request more
information at feedback@argusmedia.com Copyright © 2026. Argus Media group . All
rights reserved.
