UN survey says economic growth momentum weakening in Asia-Pacific developing countries

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 United Nations 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. 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. To sustain economic growth and ensure macroeconomic stability, economic policy-makers should seek to adopt a package of “quick win” yet credible policies that offer immediate economic boosts without raising perceived macroeconomic and sovereign risks and at the same time support vulnerable workers and people. 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. In the context of a less enabling global economic environment, prospects of slower economic growth and uneven within-country development progress, how the region can foster socioeconomic prosperity amid a transition to an environmentally sustainable economy is thus an important question. While the transition to an environmentally sustainable economy is vast in nature, the 2026 survey focuses on a shift in the energy sector away from fossil fuels towards clean and renewable energy. The energy sector accounts for 75pc of the region’s greenhouse gas emissions, while the share of fossil fuels in the primary energy supply is projected to rise further. A reversal of this trend, therefore, is central for the transition towards an environmentally sustainable economy, emphasised the UN-ESCAP report. The survey outlined a three-step approach, identifying priority energy transition goals; balancing energy transition and socioeconomic prosperity; and assessing the feasibility of policy options. The report highlighted goals to reduce reliance on fossil fuels; boost clean and renewable energy; improve energy efficiency; and ensure universal access to modern energy services. Stating that a successful transition would need to simultaneously ensure macroeconomic stability, sustained economic growth and people’s well-being, the survey said Asia-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, it said. “To overcome political economy challenges, governments should build legitimacy for the energy transition, align the timing of reforms with political cycles, and consolidate the momentum by creating new beneficiaries, survey suggests. A clear understanding of the vested interests of the state, market and society, the evolving balance of power and institutional arrangements can help governments build coalitions and deliver long-lasting reforms, ” according to the survey. The survey emphasised that proactive, coordinated, and innovative economic policymaking is needed to navigate unusually high levels of global economic uncertainty and a context marked by a retreat of multilateralism and the rules-based economic order and by an increase in conflict. In rebuilding the fiscal space, fiscal authorities should adopt a package of quick-win policies that support vulnerable population groups.

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