ADB cuts developing Asia growth forecast as energy costs bite

The Asian Development Bank on Tuesday lowered its 2026 growth forecast for developing Asia and the Pacific to 4.9%, down from the 5.1% it projected in April, as lingering disruptions from the Middle East conflict and elevated energy prices continue to weigh on the region's economies.reuters+2

The downgrade came on the same day the International Monetary Fund released its July World Economic Outlook update, which cut its global growth projection to 3.0% for 2026, down from the 3.5% average observed in 2024–25.reuters+1

Energy Prices Drive Regional Headwinds

The ADB warned that higher energy and fertilizer prices are worsening trade balances and increasing fiscal spending pressures across the region. The bank's revised outlook assumes oil prices averaging around $96 per barrel in 2026, well above the pre-conflict average of $69 per barrel. The IMF now expects oil prices to rise nearly 32% this year, pushing global consumer price inflation to 4.7% in 2026.morningstar+2

Currency depreciation across several Asian economies has compounded the pain, making energy imports more expensive and squeezing household budgets.morningstar

Philippines and Cambodia Among Hardest Hit

The Philippines faces a particularly challenging outlook. The ADB trimmed its Philippine growth forecast to 3.8% for 2026, making it the fourth-slowest growing economy in Southeast Asia. The IMF separately cut its forecast for the country to 3.9% from 4.1%, still within the government's 3.5% to 4.5% target but reflecting weakened consumption and delayed investments.bworldonline+3

Cambodia received one of the steepest downgrades. The IMF now projects growth will slow to 3% in 2026, down from 5.3% in 2025, as higher energy prices, softer external demand, and continued weakness in the real estate sector drag on activity. Inflation in Cambodia, which averaged 2.5% in 2025, is projected to reach 5.6% this year. In response, the Cambodian government unveiled a $1.24 billion stimulus package focused on job creation, vocational training, and energy management.cambodiainvestmentreview+3

The IMF's mission chief for Cambodia, Kenichiro Kashiwase, warned that financial sector vulnerabilities, real estate weakness, and asset-quality deterioration remain key risks, though he noted the riel currency has remained broadly stable.english.news