Overview

The 2026 conflict in the Middle East has placed geopolitical tensions and energy market disruptions at the center of the global economic outlook. This report explores the implications for developing Asia and the Pacific. The report's key assumptions, finalized on 10 March, envisage an early stabilization scenario, with disruptions gradually easing from April 2026. Under this scenario, growth in developing Asia and the Pacific is projected to moderate in 2026-2027, with inflation rising this year and easing slightly next year. Economic activity would be supported by resilient domestic demand, steady labor markets, and public infrastructure investment. However, uncertainty remains high, with the risk that tensions in the Middle East could persist longer than anticipated. Other risks include renewed tariff increases and an abrupt tightening in global financial conditions.

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