ADB maintains Vietnam's growth outlook amid Southeast Asia downgrades

Photo: Le Toan

According to the Asian Development Outlook report released on July 9, the region's growth forecast was downgraded to 4.6 per cent for 2026, a modest 0.1 percentage point reduction from April projections, due to weaker external demand and higher input costs.

Inflation forecasts for developing Southeast Asia are revised up from 3.2 per cent in April to 3.9 per cent in 2026 and from 2.8 per cent to 2.9 per cent in 2027. The upward revisions reflect higher global energy and food prices linked to the Middle East crisis, as well as exchange rate pressures that have raised import costs across the subregion.

Among them, Vietnam remains the region’s fastest-growing economy, with growth forecasts maintained at 7.2 per cent for 2026 and 7 per cent for 2027. Robust performance across these economies reflects sustained growth in manufacturing, resilient exports and investment, and steady domestic demand.

In addition, ADB has lowered its growth forecast for developing Asia-Pacific economies to 4.9 per cent for 2026 compared to 5.5 per cent growth in 2025. This is a reduction of 0.2 percentage points from April projections. Prolonged disruptions to energy markets caused by the Middle East conflict have weighed more heavily on the region’s prospects than anticipated.

With impacts extending beyond energy to fertilisers, other commodity prices, and supply chains, inflationary pressures are likely to persist. Regional inflation is now forecast at 4.3 per cent this year compared to 3 per cent in 2025 – an upward revision of 0.7 percentage points from April. The inflation forecast for 2027 remains at 3.4 per cent.

The report warns that renewed conflict escalation and prolonged geopolitical uncertainty remain key risks to the region’s outlook. These could further tighten energy markets, raise risk premiums, and intensify inflationary and external pressures.

Tighter global financial conditions pose additional risks, with sovereign bond yields and borrowing costs rising, and fiscal deficits projected to widen in several economies. Higher tariffs and elevated trade policy uncertainty could also weigh on activity, while rising fertiliser prices continue to threaten agricultural output and food security.

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