ADB warns Asia faces sustained inflation pressure into 2027

The Asian Development Bank warns that inflation will persist in the developing Asia-Pacific region through 2027, driven by escalating conflicts and abnormal weather patterns. Inflation is forecasted at 4.2% this year and 3.5% next year, both significantly higher than the 3% recorded in 2025. The conflict in Iran and its spread to Yemen has disrupted oil supplies, while Russia's war on Ukraine has hampered grain shipments.

El Nino, a climate phenomenon, is also contributing to the issue by causing abnormal weather patterns, which are affecting harvests and reducing hydropower generation. These factors are all pushing up prices and creating a downside risk for inflation. Albert Park, the ADB's chief economist, stated that further conflict escalation or overly severe El Nino impacts could further boost inflation.

The bank expects economic growth to slow to 5% in 2026 from 5.5%. While subsidies have temporarily eased the burden on consumers, high energy prices are now starting to permeate economies, with the impact likely to be most severe in countries where food is a large part of consumption, such as South Asia. Several economies, including Bangladesh, India, Indonesia, Pakistan, the Philippines, and Vietnam, have room for additional monetary tightening if inflation continues.

The ADB suggests that policymakers may consider rate cuts starting in 2027, depending on how inflation, growth, and external risks evolve.