APEC sees slower growth as oil prices and trade barriers rise

Economic growth in the Asia-Pacific region is expected to slow over the next two years as high oil prices in the Middle East disrupt supply chains and drive up food costs, according to a report released on May 21.

The Asia-Pacific Economic Cooperation (APEC) Policy Support Unit reported that, after expanding by 3.3 percent in 2025—slightly exceeding earlier forecasts of 3.2 percent—regional growth is expected to ease to 3.1 percent this year and moderate further to 3 percent in 2027.

Output expansion is slowing in more than half of the 21 APEC member economies. The weakening outlook is driven primarily by escalating conflicts in the Middle East, which sent crude oil prices soaring by 52.8 percent in a single month—from $68 a barrel in February to $103.90 in March.

“The region enters 2026 with short-term resilience intact, but knock-on energy price shocks, weakening demand, intensifying supply chain disruptions and narrowing room for responding to economic shocks are casting a longer shadow over the medium-term outlook,” said Carlos Kuriyama, director of the Policy Support Unit.

Kuriyama added that ordinary households and businesses are bearing the brunt of the slowdown.

APEC relies on oil and gas for 49 percent of its energy mix, importing more than 45 percent of its crude oil and 23 percent of its natural gas from the Middle East. This heavy reliance leaves the region highly vulnerable to geopolitical shocks.

The energy crunch is also threatening regional food security. APEC relies on the Middle East for 27 percent of its nitrogen-based fertilizer imports.

Rhea C. Hernando, an analyst with the unit, said rising fuel costs and shipping disruptions have caused food prices to climb sharply. The steepest price increases as of April were seen in vegetable oils, cereals and meat.

The trade outlook has also darkened due to rising tariffs and other restrictive trade measures. Growth in the volume of merchandise exports is projected to plunge to between 3.3 percent and 3.7 percent from 2026 through 2028, down from a robust 7.6 percent recorded last year.