ISLAMABAD: The momentum of economic growth in Asia-Pacific developing countries slowed to 4.6 per cent in 2025 and is projected to drop to 4pc in 2026, as fallout from the Middle East situation weighs on energy prices, supply chains and external demand, due to the conflict in the Middle East, said a new UN report on Monday.

The 2026 edition of the ‘Economic and Social Survey of Asia and the Pacific’ suggests that regional countries need to rely more on domestic and regional demand, while carefully managing the shift to clean energy to avoid short-term economic and social disruptions.

The annual survey released by the UN Regional Commission for Asia and the Pacific (UN-ESCAP) said that the average economic growth in the region moderated to 4.6pc in 2025 from 4.8pc in 2024, and 5.3pc in 2023.

However, assuming that the conflict in the Middle East will not last more than a few months and that there will be a partial de-escalation and an easing of tensions later in 2026, the survey noted that the average economic growth may inch up to 4.3pc in 2027.

UN report suggests countries need to rely on domestic, regional demand while shifting to clean energy

Under the alternative scenario of a prolonged conflict, economic growth could be notably lower than currently projected, while inflation would be higher.

Under this scenario, a surge in commodity prices and freight costs, as well as supply chain disruptions, will spike inflation and interest rates; weaker global demand will dampen merchandise exports, remittances and tourism; and subsequent job losses and plunging market sentiment will hurt consumer spending, business investment and economic growth.

Meanwhile, the room for additional fiscal support has shrunk, given high public debt levels and debt servicing burdens in many countries.

Three major downside risks are the further intensification of the recent conflict in the Middle East, the renewed escalation of global trade tensions, and global financial volatility driven by a sharp downgrade in the currently upbeat global prospects of high-technology sectors.

The UN report further emphasised that proactive, coordinated and innovative economic policymaking is required to navigate the current unusual times marked by a rise in conflicts and weakening of multilateralism and the rules-based global economic order.

The survey suggested that Asian and Pacific developing countries also need to step up efforts to meet their environmental and climate ambitions. From an economic standpoint, this is important because environmental and climate factors impact socioeconomic prosperity in a complex and multifaceted manner.

Published in Dawn, April 21st, 2026