Rising inflation has prompted several regional central banks to signal or implement tighter policy stances.

Economic growth across the Asia-Pacific region is projected to moderate over the coming years. Elevated commodity prices, tight monetary policies, and adverse weather conditions are expected to weigh on momentum through 2026 and 2027, according to a report released by Moody’s Analytics on Thursday.

The report noted that while the region initially avoided a sharper slowdown due to strong exports and artificial intelligence investments, persistent geopolitical friction in West Asia continues to cause energy price volatility. Disruptions around the Strait of Hormuz keep oil and raw material costs high, reviving broader inflationary pressures.

Moody’s Analytics forecasts regional growth to ease from 4.3 percent in 2025 to 4.1 percent in 2026, slowing further to 3.6 percent in 2027. This projected deceleration aligns with expectations that the initial surge driven by semiconductor demand and tech spending will gradually fade.

Rising inflation has prompted several regional central banks to signal or implement tighter policy stances. Countries including Singapore, Japan, South Korea, Australia, and the Philippines are navigating sticky price pressures, which continue to squeeze domestic consumer demand and raise borrowing costs.

Compounding these economic hurdles, severe climate patterns linked to El Niño threaten regional agriculture. Unusually hot and dry weather risks reducing crop yields across key markets, potentially driving up food prices and further restricting fiscal flexibility for regional policymakers.