ADB Warns: Overlapping Geopolitical Conflicts and El Nio May Keep Asia's Inflation Pressure Elevated Into Next Year

According to the latest outlook report released by the Asian Development Bank (ADB) on Wednesday, wars in Europe and the Middle East and a severe El Nino phenomenon are intensifying price pressures across Asia, potentially pushing inflation into next year and keeping central banks on alert. The ADB noted in the report that the renewed escalation of the Iran conflict and its spread to Yemen have disrupted supplies of crude oil and refined products, while Russia's war against Ukraine has disrupted food shipments. At the same time, abnormal weather triggered by El Nino has threatened crop harvests from India to Thailand, reduced hydroelectric power generation, and even restricted traffic through waterways such as the Panama Canal. ADB Chief Economist Albert Park said in the report: "Risks remain tilted to the downside. Further escalation of conflicts or El Nino effects exceeding expectations could dampen economic growth and push up inflation." The ADB said inflation in developing Asia and the Pacific will be 4.2% this year and 3.5% next year, both far above the 3% expected in 2025. The bank expects economic growth to slow from 5.5% to 5% in 2026, and has raised its oil price forecasts for this year and next to $90 and $78 per barrel, respectively. The ADB said that although broad subsidy measures this year have helped consumers cushion the shock, persistently high energy prices have begun to affect economies. The impact may be most pronounced in countries where food accounts for a high share of consumption, such as South Asian countries. The ADB said that if inflation persists, economies such as Bangladesh, India, Indonesia, Pakistan, the Philippines, and Vietnam still have room to further tighten monetary policy this year. Once inflation subsides, policymakers may begin considering rate cuts in 2027. The ADB said: "Overall, policy rates are expected to gradually return to levels before the escalation of the Middle East conflict, but the pace and extent of easing will depend on inflation and the evolution of CKH HOLDINGS external risks."