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The Manila-based agency now projects a 5.7 percent growth in South Asia in 2026, down from an earlier forecast of 6.3 percent. Inflation in the subregion is projected to rise to 7.6 percent, up 2.6 percentage points from the previous estimate.
“Markets price in persistently tighter conditions, not a quick reversal.”
The ADB said supply disruptions have exerted upward pressure on the prices of non-oil commodities, particularly fertilisers.
“Prices are surging,” Park said, adding that urea marked the largest non-energy price shock and that it has a direct impact on food costs.
South Asia sources 35 percent of its fertiliser from the Middle East. Bangladesh is a major importer of fertiliser from the Gulf nations.
“Food prices typically follow within one quarter,” he added.
Responding to a question on Bangladesh’s economic growth, he said the country-specific numbers for Bangladesh based on the reduced growth forecast will be released by the end of this month.
“So, the regional one is an indicator; I think Bangladesh’s growth will probably be a bit lower. They would have more headwinds, in effect, than the rest of the South Asia average,” he said.
“But I think you should wait; our next Asian Development Outlook will have a much more thorough assessment of Bangladesh, and that report will be coming out in July or early August,” he said.
To tackle the challenges, the ADB suggested avoiding blanket fuel subsidies and excise tax cuts.
High-income households consume more energy, and subsidies are fiscally very costly if prices stay elevated, he said.
“Policymakers should target support to vulnerable households, maintain monetary credibility, and accelerate investment in energy resilience,” he said.
Park suggested targeted cash transfers to protect vulnerable households and ensure fiscal space. A data-dependent monetary policy is needed.
“This is a supply shock, not a demand shock. Monitor inflation expectations and second-round effects before tightening; avoid choking growth unnecessarily,” he added.