ADB Cuts South Asia’s 2026 Growth Forecast to 6.0% as Energy Costs Weigh on Incomes
The Asian Development Bank lowered its forecast for South Asia’s economic growth in 2026 to 6.0%, citing elevated energy prices, pressure on household purchasing power and wider external-sector risks across the region.
The revision was published July 1, 2026, in the bank’s Asian Development Outlook. The ADB set South Asia’s 2027 growth forecast at 6.7%, but the 2026 figure signals a weaker near-term outlook for economies that remain exposed to imported fuel costs.
The figures are projections rather than completed economic results. They also cover different reporting periods: India, Nepal and Pakistan are described using fiscal-year measures, while other country outlooks are presented for 2026 calendar-year periods.
India and Bhutan face higher energy costs
India’s fiscal-year 2026 growth forecast was cut from 6.9% in the bank’s April outlook. The ADB linked the downgrade to higher energy prices, which it said are squeezing real incomes and weakening the outlook for the region’s largest economy.
That pressure can affect both household spending power and business conditions. When energy costs rise, transport and operating expenses can increase while consumers have less income available after paying for essentials. The ADB’s regional assessment places those effects alongside broader external-sector pressure rather than identifying energy prices as the region’s only risk.
Bhutan’s 2026 growth forecast was also revised down, to 6.5%. The bank said higher fuel costs were raising transport expenses and delaying private construction, giving the small Himalayan economy a direct channel through which energy prices could weigh on activity.
Country outlooks diverge
The regional downgrade was not applied uniformly across South Asia. Nepal’s fiscal-year 2026 growth forecast was revised up to 3.9%, supported by stronger industrial activity linked to hydropower.
Pakistan, meanwhile, was reported to have grown 3.7% in fiscal year 2026. The ADB attributed that performance to industry and services, together with modest gains in agriculture. That reported growth rate is different in kind from the forecasts for future performance elsewhere in the outlook and should not be treated as a direct like-for-like comparison.
Sri Lanka’s 2026 forecast was retained after strong first-quarter growth. The bank nevertheless said external-sector pressures were emerging, indicating that the country’s outlook remained exposed to developments outside domestic economic activity.
In the Maldives, the inflation outlook was retained, but the ADB expected energy-driven price pressure to emerge during the second half of 2026. The bank linked that risk to the country’s dependence on imports, which can leave domestic prices vulnerable when fuel and other imported inputs become more expensive.
Why the revision matters
South Asia’s new regional forecast matters because energy costs can spread through economies in several ways. Imported fuel affects transportation, construction and production, while higher prices can reduce real incomes and complicate efforts to sustain consumer demand. External-sector pressure adds another layer of risk for countries dependent on trade, foreign exchange or imported goods.
The country-by-country figures show why the regional number should not be read as a uniform prediction. Hydropower-linked industrial activity supported Nepal’s upgrade, while energy costs weighed on the outlook for India and Bhutan. Pakistan’s reported expansion reflected gains across industry, services and agriculture, and Sri Lanka’s forecast held despite signs of new external pressure.
The ADB’s next outlook will show whether the regional projection changes as energy prices and external conditions develop. The July figures may be revised if those conditions move materially from the assumptions behind the bank’s forecast.
Sources
- Asian Development Outlook July 2026, Asian Development Bank
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