Asia-Pacific growth slows to 4.6% in 2025, projected at 4% in 2026 amid Middle East impact

Economic growth in developing Asia-Pacific economies slowed to 4.6% in 2025 and is projected to decline further to 4% in 2026 due to the impact of Middle East tensions on energy prices, supply chains and external demand, according to a report by the United Nations Economic and Social Commission for Asia and the Pacific.

The findings were released in the 2026 edition of the Economic and Social Survey of Asia and the Pacific, which noted a gradual moderation in regional growth from 5.3% in 2023 to 4.8% in 2024 and 4.6% in 2025.

The report stated that if tensions ease during 2026, growth could recover slightly to 4.3% in 2027. However, a prolonged conflict scenario could result in lower growth and higher inflation across the region.

Under such a scenario, rising commodity prices, increased freight costs and supply chain disruptions could push inflation and interest rates upward. Weaker global demand may also reduce exports, remittances and tourism inflows, affecting overall economic activity.

The report highlighted that limited fiscal space, due to high public debt and debt servicing burdens, reduces the ability of governments to provide additional economic support.

It identified key risks to the outlook, including further escalation of Middle East tensions, renewed global trade frictions and financial market volatility linked to shifts in technology sector prospects.

The survey recommended that countries increase reliance on domestic and regional demand while managing the transition to clean energy to avoid short-term economic disruptions.

It also called for coordinated and proactive policymaking to address the current global environment, marked by rising geopolitical tensions and weakening multilateral cooperation.

The report added that efforts to meet environmental and climate targets should be strengthened, as these factors have direct implications for long-term economic stability and growth.