Thai growth lags region as Middle East tensions weigh on outlook: ADB

Economic growth in developing Asia and the Pacific will slow to 5.1 per cent this year and next year, down from 5.4 per cent last year, as the Middle East conflict and trade uncertainty weigh on the region, the Asian Development Bank (ADB) said today.

By contrast, Thailand’s growth outlook remains significantly weaker than the regional average, underscoring an uneven recovery across Asia.

The Thai economy is projected to expand by around 1.5 per cent to 1.8 per cent this year, according to estimates from the Bank of Thailand and the World Bank, with some forecasts near 1.6 per cent, reflecting weaker exports, high household debt and structural constraints.

In its latest Asian Development Outlook, released today, the Manila-based lender said that regional inflation is projected to rise to 3.6 per cent this year and ease slightly to 3.4 per cent next year, compared with 3.0 per cent last year.

The forecasts were based on assumptions finalized in early March, under what the ADB described as “exceptionally high uncertainty,” including expectations of early stabilization in the Middle East. On Wednesday, the US and Iran agreed on a two-week ceasefire.

Despite mounting external risks, the ADB said the region enters the current global environment from a position of relative strength, supported by robust domestic demand, stable labor markets and increased public infrastructure spending.

“A prolonged conflict in the Middle East is the single biggest risk to the region’s outlook,” ADB Chief Economist Albert Park said. He warned that sustained tensions could keep energy and food prices high while tightening global financial conditions.

Park urged governments to pursue sound macroeconomic policies and provide targeted support to vulnerable households.

The report outlined several transmission channels through which a worsening conflict could hit regional economies, including rising price pressures, shipping disruptions and financial market volatility.

Growth prospects have weakened across most economies in the region, even as private consumption remains resilient and demand for artificial intelligence-related goods provides some support.

China’s economy is forecast to grow 4.6 per cent this year and 4.5 per cent next year, down from 5.0 per cent last year. India’s growth is expected to moderate to 6.9 per cent this year from 7.6 per cent last year, before picking up to 7.3 per cent next year, driven by strong domestic consumption.

Oil prices are expected to remain elevated in the near term, although they could stabilize if geopolitical tensions ease. The ADB also warned that higher energy costs and potential disruptions to fertilizer supplies could push global food prices higher, adding to inflationary pressures.