The Asian Development Bank (ADB) has revised down its economic growth forecast for developing Asia and the Pacific to 4.9% in 2026, compared with 5.5% growth in 2025, citing prolonged disruptions in global energy markets stemming from the ongoing Middle East conflict. The revised projection, published in the Asian Development Outlook (ADO) July 2026, is 0.2 percentage points lower than the Bank’s April forecast, reflecting mounting geopolitical and inflationary pressures across the region.

According to the report, Sri Lanka’s economy is projected to expand by 4% in 2026, while regional growth is expected to recover modestly to 5.1% in 2027 as energy market disruptions gradually ease. Regional inflation is now forecast at 4.3% in 2026, up from 3% in 2025, driven by higher energy prices, rising fertiliser costs, commodity price increases and continuing supply chain disruptions.

Commenting on the outlook, ADB Chief Economist Albert Park said durable implementation of the June framework agreement could help stabilise global energy markets, but warned that the pace of recovery remains highly uncertain. He noted that policymakers across the region must carefully balance measures to sustain economic growth while containing inflation.

The ADB also highlighted several downside risks, including renewed geopolitical tensions, tighter global financial conditions, higher sovereign borrowing costs, expanding fiscal deficits and increasing trade policy uncertainty. Growth forecasts for India, Southeast Asia and the Pacific have been revised lower, while projections for the People’s Republic of China remain unchanged, supported by resilient exports and infrastructure investment.

Founded in 1966, the ADB continues to play a pivotal role in supporting sustainable, inclusive and resilient economic development across Asia and the Pacific through strategic partnerships and development financing.