Southeast Asia's energy security at a crossroads as power demand surges, IEA warns
The region should diversify energy sources and supply routes, make greater use of domestic resources where viable and become more energy efficient, the International Energy Agency recommends in a new report.
New Delhi: The World Bank has lifted its growth forecast for South Asia, citing robust consumer demand amid an energy crisis. The region's growth now stands at 6.9% for 2026, a 60 basis point increase from its earlier estimate and 10 basis points above its projection from last year. This is largely due to government interventions to protect consumers, robust remittances, and steady domestic demand, according to World Bank Chief Asia Economist Franziska Ohnsorge.
South Asia, heavily reliant on imported energy, has proven more resilient than anticipated to supply interruptions stemming from the US-Israeli conflict in Iran. India, the region's largest economy, is expected to grow by 7.1% in 2026/27, up from the June forecast of 6.6%, but still lower than the impressive 8.6% growth witnessed in 2025/26. Despite rising inflation eroding consumer spending power, growth has remained resilient, with the World Bank noting a notable decoupling between inflation and economic expansion.
Emerging markets typically experience a lag of 18 months between economic shocks and their impact on activity. The Bank has not provided a precise inflation forecast for 2026, but country-level projections are available. India's central bank anticipates inflation to average 5% in the current financial year, potentially prompting interest rate hikes as early as October 7 and again in December, according to most economists surveyed by Reuters.
Another risk to South Asia's growth outlook is a prolonged El Niño, which could particularly affect agriculture-dependent India, where inflation is already high. El Niño last affected India in 2023, when rainfall fell to 95% of the long-term average. The World Bank recommends that countries leverage artificial intelligence (AI) to sustain growth momentum in the medium term.
While AI adoption in South Asia lags behind that of advanced economies, it is growing rapidly, with 23% of Indian firms using AI, compared to 43% of firms in the United States.
Written by urgent.news from Free Malaysia Today's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
Also reported by 3 other outlets
- South Asia growth holds firm, but energy, weather risks loom freemalaysiatoday.com
- Southeast Asia’s energy chiefs meet against backdrop of Iran war aljazeera.com
- Rising electricity demand deepens Southeast Asia’s energy security concerns, IEA reports says winnipegfreepress.com
