ADB lowers Southeast Asia growth forecast due to global energy crisis

On July 9, the Asian Development Bank (ADB) updated its Asia-Pacific economic growth forecast, lowering growth expectations for the region and most sub-regions.

The Middle East conflict has lasted into its fifth month, exceeding the forecast according to the positive scenario ADB made at the end of March. Recently, US President Donald Trump announced that the ceasefire with Iran has ended, and expressed his desire to “completely resolve the problem” instead of pursuing diplomatic efforts with this country.

Faced with persistent conflicts, ADB lowered its Southeast Asia growth forecast to 4.5%, down 0.1% compared to the report three months ago. At the same time, inflation in this area is expected to jump to 3.8%, an increase of 0.7%.

Experts from ADB believe that prolonged energy disruption due to the Middle East conflict will have a more serious impact on the regional economy than expected. This impact spread from the energy sector to fertilizer, other commodities and the supply chain, prolonging inflationary pressures.

In addition, high fertilizer prices cause increased input costs in the agricultural sector. The strong El Nino phenomenon aggravates the problem of food security, which was indirectly affected by the Iran war.

Meanwhile, the US, the region’s major buyer, also reduced growth momentum in 2026 from 2.3% to 2.1%, reflecting declining demand due to high inflation and people tightening spending. This growth rate will continue to decline to 2% next year, in the context of geopolitical instability remaining high. New tariff policies from this country are also factors that destabilize the region’s export activities.

In Southeast Asia, the Philippines and Cambodia had their growth forecasts lowered the most. The Philippines’ growth is expected to be 3.8%, while Cambodia’s is 4.1%, down 0.6% and 0.5% respectively compared to the previous forecast. Thailand maintained a modest growth rate of 1.8%. Brunei is the only case whose growth was raised from 1.6% to 1.8%, thanks to the benefits from high oil prices.

Also according to ADB, Vietnam continues to be the fastest growing economy in the region, with GDP growth forecast to remain at 7.2% in 2026 and 7% the following year.

For the developing Asia and Pacific region, growth is forecast to drop to 4.9% in 2026, down 0.6% from the 2025 level. While China maintains its economy, India’s GDP growth is forecast to decline to 6.6% (down 0.3%) in 2026, as rising energy costs weaken domestic demand.

ADB warns of the risk of renewed conflict and prolonged geopolitical instability. These factors could continue to tighten energy markets, increase risk premiums and exacerbate inflationary pressures.