Asia's Economic Resilience Is Being Tested by the Energy Shock
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Asia's economic growth is being tested by the energy supply shock caused by the war in the Middle East, which is raising inflation and weakening external balances. Despite this, the region is expected to remain the main driver of global growth, with a projected expansion of 4.4% this year.
Asia's economy entered 2026 on a strong footing, but the war in the Middle East and the ensuing energy supply shock are now posing significant challenges. The region's dependence on imported oil and gas is raising inflation, weakening external balances, and narrowing policy options. Despite these headwinds, Asia is projected to remain the main driver of global growth, with a 4.4% expansion this year and 4.2% next year. China and India are expected to contribute 70% of the region's growth. The energy shock is affecting the region through several channels, including worsening terms of trade, reducing real incomes, and disrupting supply chains. The region's oil and gas use amounts to about 4% of GDP, and it is heavily reliant on imports, making it vulnerable to price shocks.
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