The region’s gross domestic product is now forecast to grow by 4.6%, down from an April prediction of 5.2% growth, the multilateral lender said in an update to its flagship economic publication, the “Asian Development Outlook”.

For next year, the region is predicted to expand by 5.2%, from a previous forecast of 5.3%.

While the coronavirus pandemic has abated, the economic fallout from Russia’s invasion of Ukraine on the region has intensified, the bank said.

War-induced supply disruptions and escalating sanctions on Russia have led to a spike in global commodity prices. The region’s inflation is now expected to accelerate to 4.2% in 2022, up from a 3.7% forecast in April, the ADB said. Inflation next year is tipped to slow to 3.5%, but that is still faster than the April estimate of 3.1%

Rising inflation has prodded central banks to begin tightening monetary policy or accelerate its pace, the ADB said, moves that could temper growth.

The downbeat outlook for the region also takes place against the backdrop of a slowdown in China, the region’s largest economy, which is now expected to grow 4% this year instead of 5%. China has stuck to a zero-Covid policy, imposing repeated large-scale lockdowns to fight coronavirus outbreaks.

Southeast Asia’s growth is tipped to improve slightly, with the ADB now forecasting to 5% growth, up from 4.9%. The growth outlooks for Indonesia and the Philippines have been raised to 5.2% and 6.5%, respectively, up from 5% and 6% as their economies reopen.

South Asia’s economic growth is expected to come in at 6.5%, down from an earlier 7% forecast, as Sri Lanka deals with an economic crisis and India slows. India’s economy is expected to grow by 7.2%, instead of 7.5%, amid rising inflation and monetary tightening in developing Asia’s second-largest economy.

The Caucasus and Central Asian subregion’s forecast has been raised to 3.8% growth, up from 3.6%, with the ADB noting that Armenia, Azerbaijan, Georgia, and Tajikistan “have withstood the economic fallout from the war in Ukraine better than expected”.

The Pacific is also expected to grow faster at 4.7%, up from 3.9%, thanks to a stronger-than-expected rebound in Fiji’s tourism industry.

The ADB said financial conditions in developing Asia have deteriorated, partly due to aggressive tightening by the US Federal Reserve, which has led to currency depreciation and portfolio outflows in the region.

The bank also warned that the continuing war in Ukraine could lead to further surges in global energy and commodity prices, which will likely fan inflation in the region.

“Rising food prices and shortages, in particular, could threaten food security and heighten social tensions in some economies,” the ADB said.