NEW YORK: According to the United Nations Development Programme (UNDP), the military escalation in the Middle East may end up costing countries in the Asia-Pacific billions of dollars in losses. Moreover, nearly nine million people could also fall into poverty as a result of the war.
The UNDP published an assessment of what the conflict will cost the region on Tuesday (April 14), underlining that because of dependence on imported energy and key supply chains, much pressure will be felt by households, small businesses, and public budgets. Transport, electricity, food, and fertiliser have already increased in price.
The war started when the United States and Israel began bombing Iran on Feb 28, which led to the effective closure of the Strait of Hormuz, through which one-fifth of the world’s fuel transits. This has caused a supply disruption and a steep increase in the price of oil, and countries in the Asia-Pacific region, heavily reliant on energy from Gulf states, have been particularly hard hit.
While a two-week ceasefire announced on April 7 brought oil prices back down, at least temporarily, the UNDP report underlined the vulnerability facing millions of people in the Asia-Pacific region.
Who is most at risk?
The report identified that low-income households, informal workers, migrants, and small enterprises are the most at-risk due to the conflict, with women being the most vulnerable.
Overall, the UNDP says that around 8.8 million individuals risk falling into poverty, with output losses of between US$97 billion (S$123 billion) to US$299 billion (S$380 billion). This is estimated to be between 0.3 and 0.8 per cent of regional GDP.
In terms of decline according to the Human Development Index, Iran is expected to lose the equivalent of one to one and a half years of progress. For other countries, human development losses could range from weeks to months. However, if the conflict proves to be persistent, this could increase substantially, especially for countries whose citizens rely on remittances, imported energy, and food.
The report added that South Asia will suffer the most pronounced losses due to higher exposure to income and price shocks and more limited policy buffers. East and Southeast Asia, meanwhile, are likely to experience smaller setbacks in comparison.
Kanni Wignaraja, UN Assistant Secretary‑General and UNDP Regional Director for Asia and the Pacific, said, “The strain this war is placing across Asia-Pacific is already visible. It is reaching households faster than policy can adjust. Despite the recent ceasefire, the resulting prolonged volatility in global markets is imposing increasingly difficult trade-offs between stabilising prices, supporting vulnerable households, and maintaining essential public services and market investments. At the same time, we see important opportunities for countries to accelerate long‑term resilience through adaptive social protection, stronger local and regional value chains, and diversified energy and food systems.” /TISG
Read also: Rising tensions and energy risks could push global economy towards recession: IMF
