Asia Pacific faces weaker growth and higher inflation from Middle East crisis, ADB warns

The Asian Development Bank warned on Wednesday that the ongoing conflict in the Middle East threatens to weaken economic growth and exacerbate inflation across the Asia Pacific region in 2024. The Manila-based multilateral lender stated that escalating geopolitical tensions, particularly the Israel-Hamas war and disruptions in the Red Sea, are creating significant headwinds for developing Asian economies that were already facing a complex recovery path. In its latest Asian Development Outlook report, the ADB highlighted how the crisis is transmitting economic shocks through two primary channels: elevated global oil prices and disrupted shipping routes. Oil prices have remained volatile and above pre-crisis levels, directly increasing energy import costs for many Asian nations. Simultaneously, attacks on commercial vessels in the Red Sea have forced rerouting around Africa, dramatically increasing shipping costs and delivery times for both imports and exports, squeezing regional supply chains. The bank revised its 2024 growth forecast for developing Asia downward to 4.9%, a slight dip from its previous projection, while raising its inflation outlook. The report emphasized that the region's growth momentum remains fragile and uneven, with some economies more vulnerable than others. Nations heavily reliant on energy imports or those with export-oriented manufacturing sectors integrated into global logistics networks face the greatest immediate risks from continued instability. ADB economists called for vigilant monetary policy and strengthened regional cooperation to mitigate these external shocks. They noted that while domestic demand in some economies remains resilient, the combined effect of costlier energy and trade disruptions could dampen consumer spending and business investment. The warning underscores how regional prosperity remains tethered to global stability, with distant conflicts having immediate and tangible economic consequences for Asia's development trajectory.