Economic growth across Asia and the Pacific is projected to slow further in 2026 amid global uncertainties, although a transition to renewable energy could help offset headwinds and support more resilient expansion, according to a United Nations report.

Based on its latest “Economic and Social Survey of Asia and the Pacific 2026,” the United Nations Economic and Social Commission for Asia and the Pacific (ESCAP) said regional growth is expected to ease to 4.0 percent in 2026, down from 4.6 percent in 2025.

Should ESCAP’s projections hold true, this would mark the fourth consecutive year of decline for the region, which previously grew at 4.8 percent in 2024 and 5.3 percent in 2023. 

Inflation, meanwhile, is projected to accelerate to an average of 4.6 percent in 2026 from 3.5 percent in 2025, reflecting persistent price pressures linked to energy and food costs.

The report cited the ongoing Middle East conflict, weaker global demand and elevated commodity prices as key risks weighing on the region’s outlook this year. ESCAP said these factors are expected to push up the cost of living and dampen economic activity, while high public debt and the prospect of tighter monetary policy could limit governments’ capacity to respond.

Despite the slowdown, the organization said Asia-Pacific is likely to remain the fastest-growing developing region globally, supported by strong domestic demand in key economies.

The report emphasized, however, that sustaining growth will require a shift away from reliance on external demand toward stronger domestic and regional drivers. It identified priorities such as boosting productivity, expanding social protection, improving access to finance, and enhancing digital and physical connectivity.

A key upside factor ESCAP cited is the region’s transition to clean and renewable energy, which could generate new investments, create jobs, and reduce vulnerability to volatile fossil fuel markets. Accelerating this shift is seen as critical to building more inclusive and sustainable economies over the medium term.

ESCAP’s baseline outlook assumes that geopolitical tensions in the Middle East will ease within the year. Under this scenario, regional growth could recover modestly to 4.3 percent in 2027.

However, the report warned that a prolonged conflict could significantly weaken the outlook, as further spikes in commodity prices and shipping costs would disrupt supply chains, fuel inflation, and constrain trade-dependent economies in the region.