The Asian Development Bank has warned that the impact of the Middle East conflict will continue to affect multiple sectors, including manufacturing and tourism, and will slow down economic growth in Asia, even if oil prices stabilize in the coming months.
In its Asian Development Outlook report released on Friday, the bank stated that due to the conflict involving Iran, GDP growth in the Asian region is projected to slow to 5.1% this year, down from 5.4% in 2025.
The report's forecasts were finalized more than a week after the outbreak of the conflict. The projections assume that oil prices will gradually normalize by the end of the year, returning close to pre-conflict levels. However, conditions are expected to remain volatile, with oil prices likely to experience significant daily fluctuations based on developments in the conflict.
The President of the Asian Development Bank noted in the report that the upward momentum of developing economies in the Asia-Pacific region is facing a severe test. Although the region's direct risk exposure is limited, it remains vulnerable to rising prices of commodities such as energy. This could drive up inflation and lead to tighter financial conditions.
The Manila-based multilateral lending institution forecasts that economic growth in China, Asia's largest economy, will slow to 4.6% this year from 5% in 2025, with domestic consumption expected to remain subdued.
The Asian Development Bank also projects that economic growth in developed economies across the Asia-Pacific will slow to 2.2% this year from 2.5% last year, with Hong Kong, Japan, Singapore, and Taiwan all expected to experience slower growth. The report further anticipates that inflation in developing economies across the Asia-Pacific will rise to 3.6% this year from 3% in 2025, driven by higher energy prices.
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