Economic growth momentum across Asia-Pacific developing countries is showing signs of weakening, according to a new United Nations assessment that highlights rising global uncertainty driven by geopolitical tensions, energy market disruptions, and structural economic pressures.
The 2026 edition of the Economic and Social Survey of Asia and the Pacific, released by the United Nations Economic and Social Commission for Asia and the Pacific (UN ESCAP), projects regional growth to slow to 4.6 percent in 2025 and further decline to around 4 percent in 2026. The report attributes this slowdown largely to spillover effects from the ongoing conflict in the Middle East, which is impacting energy prices, global supply chains, and external demand conditions.
The survey notes that average regional growth has already been moderating, falling from 5.3 percent in 2023 to 4.8 percent in 2024 and 4.6 percent in 2025. It warns that continued instability could further weaken economic momentum across developing economies in Asia and the Pacific, which remain heavily dependent on global trade, energy imports, and external financing.
Under a baseline scenario in which tensions in the Middle East ease gradually in 2026, the report expects growth to slightly recover to 4.3 percent in 2027. However, it cautions that a prolonged conflict could significantly worsen economic conditions, pushing inflation higher and reducing growth further. The report outlines that in such a downside scenario, rising commodity prices, higher freight and insurance costs, and persistent supply chain disruptions would place additional pressure on inflation and interest rates. Weaker global demand would likely reduce exports, remittance inflows, and tourism earnings, while also dampening investment and consumer spending across the region.
It further warns that fiscal space in many developing economies has become increasingly constrained due to elevated public debt levels and rising debt servicing costs. This limitation reduces governments’ ability to implement large-scale stimulus measures in response to external shocks. The survey identifies three key risks to the regional outlook: escalation of the Middle East conflict, renewed global trade tensions, and volatility in international financial markets driven by potential downturns in high-technology sectors.
UN ESCAP emphasizes the need for coordinated and adaptive policymaking to manage these risks. It calls for governments in the region to adopt targeted “quick-win” economic policies that can deliver short-term support to growth while maintaining macroeconomic stability and avoiding additional sovereign risk pressures. The report also stresses the importance of strengthening domestic and regional demand as global conditions weaken. It suggests that Asia-Pacific developing economies should reduce overdependence on external markets and focus more on internal consumption, regional trade integration, and investment-led growth strategies.
A significant portion of the report focuses on energy transition challenges. It highlights that the energy sector accounts for around 75 percent of greenhouse gas emissions in the region, while dependence on fossil fuels remains high and is projected to increase if current trends continue. Reversing this trajectory is presented as essential for achieving long-term sustainability.
The survey recommends accelerating investment in renewable energy, improving energy efficiency, and expanding access to modern energy services. It also proposes a structured three-step framework that includes setting clear transition goals, balancing economic and social impacts, and assessing policy feasibility to ensure a smooth shift away from fossil fuels. However, the report acknowledges that the transition process carries short-term economic and social risks. It advises governments to carefully manage reforms to avoid disruptions, particularly for vulnerable populations and energy-dependent industries.
To address political and institutional challenges, UN ESCAP recommends building broader social consensus around energy transition policies, aligning reforms with political cycles, and identifying groups that can benefit from structural change. It argues that effective coordination between the state, market, and society is essential for sustaining long-term reform momentum.
The survey concludes that Asia-Pacific economies are entering a period of heightened uncertainty marked by weaker global cooperation, rising geopolitical tensions, and structural economic shifts. In this environment, it calls for proactive policy responses aimed at safeguarding growth, maintaining stability, and supporting inclusive development while managing the transition toward a more sustainable economic model.
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