Manila, Philippines: The intensifying Middle East conflict threatens economic stability across developing Asia and the Pacific, with India and South Asia facing the severest blows from import dependence, according to an Asian Development Bank (ADB) brief dated 26 March 2026.
Prolonged disruptions to energy supplies and shipping routes beyond a year could trim regional growth by 1.3 percentage points in 2026-2027 while driving inflation up 3.2 points. These blows stem from spiked energy costs, fractured supply lines, credit crunches, and slumps in tourism plus remittances. Fleeting tensions might let prices rebound fast, but drawn-out strife would cement elevated expenses and profound downturns, the notes states.
Agriculture bears the brunt already. The Middle East furnishes half of global urea and 30% of ammonia exports—fertiliser staples. Qatar’s QAFCO paused output amid gas curbs, worsening shortages alongside Gulf dominance in 45% of sulphur and a third of helium exports. Oil rocketed from $70/barrel in late February to a $120 peak, lingering above $100; natural gas has followed suit. Fertiliser’s gas-heavy production funnels these rises straight to Asian farmers’ inputs.
Farmers might skimp on fertiliser, curbing yields, as transport and processing costs climb. ADB flags food inflation as the prime household channel, with import-reliant Asia-Pacific nations vulnerable to Hormuz delays hiking freight and insurance — endangering crop cycles. States face subsidy strains, farmers profit erosion, and output risks, amplifying consumer food costs in long-haul scenarios.
Impacts vary: Southeast Asia and Pacific brace for sharpest growth dips from energy/shipping woes; South Asia endures fiercer inflation given food-energy spending heft and import needs.
“Prolonged energy disruptions could force economies in developing Asia and the Pacific to navigate a difficult trade-off between weaker growth and higher inflation,” said ADB Chief Economist Albert Park. He pressed governments to shield the needy while forging enduring resilience.
The ADB brief proposes four targeted responses. Allow energy prices partial pass-through to consumers, avoiding sweeping subsidies or caps—this fosters savings, fuel swaps, and green investments. Limit fiscal aid to time-bound support for at-risk households and sectors, curbing budget strain. Central banks should inject pinpoint liquidity, sidestepping harsh hikes, with forthright talk to tame inflation fears. Demand curbs include AC temperature rules, essential-lighting trims, peak power campaigns, shifted work hours, and pushes for transit/car-free initiatives.
Conflict waves also snag supply chains, global finance, and Red Sea/Suez trade, potentially denting tourism and remittances. ADB caveats high uncertainty but underscores readiness for tougher times ahead.
As Asia-Pacific mends from prior jolts, this ADB alert spotlights geopolitical vulnerabilities, pressing leaders to fuse immediate farmer-household succor with robust supply and energy safeguards.
(Credit: owsa.in)
