The US-Iran war drove global energy prices higher. Governments across East Asia and the Pacific responded more aggressively than peers elsewhere, leaning heavily on subsidies to spare households and businesses the full effect at the pump.
Indonesia, Thailand and Vietnam took steps to suppress retail gasoline prices. Their dollar reserves have fallen by between 15% and 40% this year.
The World Bank said the subsidy measures may be 'unsustainable'. It warned that economies in East Asia and the Pacific risk running out of firepower as they try to cushion future energy shocks.
The problem is unlikely to disappear quickly. The World Bank forecasts that Middle East oil exports will not return to pre-conflict levels until mid-2027.
Even so, the bank forecasts growth of 4.5% this year for East Asia and the Pacific, a 0.3 percentage point increase on its previous forecast. Its forecast for 4.4% growth next year was unchanged.
The World Bank also raised its forecast for India to 7.1% for the fiscal year ending March 2027, a half percentage point increase from its earlier estimate. Franziska Ohnsorge, the World Bank's chief economist for South Asia, said: 'Domestic demand has been remarkably resilient'.
The Reserve Bank of India's estimate is 6.7%, which is widely expected to be upgraded on Wednesday. The World Bank's forecasts were contained in its South Asia Development Update, released on Tuesday, 6 October 2026.
For governments that have kept retail prices down, the arithmetic is becoming harder. The measures soften an immediate energy shock, while depleted reserves leave less room to repeat that response if another one arrives.
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