The report also said that El Nino poses a dual risk of food and energy vulnerability for India.
“Lower rainfall could reduce crop yields and hurt food supplies, particularly if conditions prove more severe than anticipated and countries are underprepared,” it said.
It forecasts a decline in Asia-Pacific growth to 4.1% in 2026 from 4.3% in 2025, before falling further to 3.6% in 2027 as the boost from artificial intelligence (AI)-led investment and exports gradually weakens. “Our High Oil Price scenario shows GDP losses across the APAC region peaking at around 6%, a larger hit than either Europe or the US would face,” the report said.
Moody’s Analytics said strong demand for AI, particularly semiconductors, has supported exports across the region, helping offset weakness in other sectors. However, it cautioned that higher commodity prices, tighter monetary and fiscal policies, and trade uncertainty are adding pressure on regional economies.
For India, higher crude oil prices remain a key concern. Renewed tensions in West Asia have disrupted shipping through the cruicial Strait of Hormuz waterway, pushing up energy prices and adding to inflationary pressures across Asia.
Moody’s Analytics said this could make it harder for central banks to support growth, as policymakers balance inflation risks with the need to sustain economic activity.