ADB warns Asia faces sustained inflation through 2027

The Asian Development Bank on Wednesday warned that wars in Europe and the Middle East, combined with a severe El Niño weather pattern, are amplifying price pressures across Asia and will likely keep inflation elevated through 2027, forcing central banks across the region to remain on guard.

Inflation to Stay Above Pre-Crisis Levels

In its latest Asian Development Outlook released September 23, the ADB forecast inflation for the developing Asia-Pacific region at 4.2% in 2026 and 3.5% in 2027 — both well above the 3% recorded in 2025. The Manila-based lender said re-escalation of fighting in Iran and the spread of conflict to Yemen have choked supplies of crude and refined products, while Russia's war on Ukraine has disrupted grain shipments. Abnormal weather patterns due to El Niño are threatening harvests from India to Thailand and reducing hydropower generation.business-standard+1

Regional economic growth is now forecast at 5.0% in 2026, down from 5.5% last year, while oil-price forecasts have been raised to $90 and $78 a barrel for 2026 and 2027 respectively. "Risks remain tilted to the downside," ADB chief economist Albert Park said. "Further escalation of conflicts or worse than expected El Niño impacts could dent growth and push inflation higher."adb+1

Rate Hikes Still on the Table

While broad subsidies have helped cushion the blow for consumers, persistently high energy prices have begun working through economies, particularly in countries where food weighs heavily in household spending, such as South Asia. The ADB said several economies — including Bangladesh, India, Indonesia, Pakistan, the Philippines, and Vietnam — have scope for further monetary tightening this year if inflation persists. Rate cuts may only come into view in 2027 once price pressures recede, the bank said.nationthailand+2

India's Growth Upgraded, but Risks Build

Separately, S&P Global ↗ 1.01% on Wednesday raised India's FY27 GDP growth forecast to 7% from 6.6%, citing robust industrial activity, healthy consumption, and accelerating government investment. The ADB and Fitch Ratings also upgraded their India projections, to 7% and 6.9% respectively. However, S&P Global expects the Reserve Bank of India to raise its policy rate by 25 basis points this fiscal year, projecting consumer inflation will average 5.1%. Cumulative monsoon rainfall was 15% below normal through September 9, raising concerns over agricultural output and food prices. Higher U.S. interest rates and currency depreciation across the region add further complications, with India, Indonesia, the Philippines, and Thailand each seeing their currencies weaken by more than 5% through mid-September.firstpost+1