The Asian Development Bank warns that prolonged conflict in West Asia could cut regional growth by 1.3 percentage points and raise inflation by 3.2 percentage points by 2027.
MANILA: A prolonged conflict in West Asia could significantly hamper economic growth across developing Asia and the Pacific. According to a new Asian Development Bank report, growth could be lowered by up to 1.3 percentage points over 2026 and 2027.
The report, released Thursday, also warns inflation could rise by 3.2 percentage points if energy market disruptions last more than a year. The conflict impacts regional economies primarily through higher energy prices, supply chain disruptions, and tighter financial conditions.
Tourism and remittances could also be negatively affected. The ADB brief outlines three risk scenarios based on the conflict’s duration.
Under a short-lived conflict, energy price pressures would ease relatively quickly. More prolonged disruptions would lead to larger and more persistent impacts on growth and inflation.
Adverse effects on growth will be most severe in developing Southeast Asia and the Pacific. Inflation is projected to rise the most in South Asian economies.
“Governments should focus on containing market stress and protecting the most vulnerable,” said ADB Chief Economist Albert Park. He added that policies should also aim to improve longer-term resilience.
The report advocates for policies that stabilise rather than suppress price signals. It recommends that fiscal support should be targeted and time-bound.
Central banks should prioritise limiting excessive market volatility while closely monitoring inflation expectations. Governments are also advised to curb energy demand where feasible.
