The Zhitong Finance App learned that according to the latest outlook report released by the Asian Development Bank (ADB) on Wednesday, the war between Europe and the Middle East and the severe El Niño phenomenon are increasing price pressure across Asia, which may drive inflation to continue until next year and keep central banks alert.
The Asian Development Bank pointed out in its report that the war in Iran has once again escalated and the conflict spread to Yemen, causing the supply of crude oil and refined oil products to be blocked; Russia's war against Ukraine has disrupted food transportation. Meanwhile, the abnormal weather caused by El Niño has threatened crop harvests from India to Thailand, reduced hydroelectric power generation, and even restricted traffic on waterways such as the Panama Canal.
Albert Parker, chief economist at the Asian Development Bank, said in the report: “Risks are still biased downward. Further escalation of the conflict or the impact of the El Niño phenomenon beyond expectations could dampen economic growth and drive up inflation.”
The Asian Development Bank's inflation rate in the Asia-Pacific developing region is 4.2% this year and 3.5% next year, both far higher than 3% in 2025. The bank expects the economic growth rate to slow from 5.5% to 5% in 2026, and raise the oil price forecast for today and next to $90 and $78 per barrel, respectively.
The Asian Development Bank said that although extensive subsidy measures helped consumers mitigate the impact this year, continued high energy prices have begun to have an impact on countries' economies. This impact is likely to be most pronounced in countries with a high share of food consumption, such as South Asian countries.
The Asian Development Bank said that if inflation continues, economies such as Bangladesh, India, Indonesia, Pakistan, the Philippines and Vietnam still have room to further tighten their monetary policies this year. Once inflation subsides, policymakers may start considering cutting interest rates in 2027.
The Asian Development Bank said, “Overall, policy interest rates are expected to gradually return to the level before the escalation of the Middle East conflict, but the speed and extent of easing will depend on the evolution of inflation, growth, and external risks.”