RECENT geopolitical tensions and energy shocks have renewed global inflation risks, keeping growth subdued. Post-pandemic bottlenecks and transportation strains severely restricted output and raised material costs, Geopolitical conflicts, particularly in the Middle East, spiked oil and fuel prices significantly. Large government budget deficits and massive money supply expansion fueled excess demand. Headline inflation has slowed from its post-pandemic peak, but persistent government spending keeps global CPI around 3%, above pre-pandemic targets. Aggressive monetary policy tightening by global central banks has helped anchor expectations, though uncertainties remain. Lingering liquidity and cost pressures continue to support hard assets and equities while squeezing consumer purchasing power.
The early 2020s saw a series of unprecedented shocks in rapid succession, including the Covid-19 pandemic and the energy and security crises following Russia’s attack on Ukraine. These shocks triggered a sharp surge in prices. On the supply side, disruptions to global supply chains and massive increases and volatility in energy and commodity prices were major drivers. On the demand side, spending shifted from non-tradable services to tradable goods such as electronics. Demand was further supported by broad-based expansionary fiscal policies and loose monetary conditions. Firms passed higher costs on to consumers through increased prices, while consumer sentiment deteriorated amid persistently high inflation.
This article summarizes the factors behind the unusually strong surge in inflation and, using available data on firms’ pricing behaviour, argues that the subsiding inflation wave may be largely a thing of the past unless another external shock occurs. The world remains in an environment of weak growth, high debt and financial repression, alongside continued monetary expansion that inflates nominal valuations and requires investors to remain selective. To protect against monetary inflation, investors may consider equities, particularly beyond the “Magnificent Seven” technology companies. Gold and silver may also provide protection against declining purchasing power, while Bitcoin, despite its volatility, is viewed by some investors as an alternative to sovereign debt.
Global growth in 2026 is expected to remain weak but positive, supported by government spending, although persistent inflation continues to erode purchasing power. Poor growth and monetary expansion are likely to support valuations and solid large-cap earnings, while volatility and widening differences between winners and losers remain important considerations. Gold, silver and Bitcoin may provide protection against monetary inflation and the erosion of fiat currencies’ purchasing power. Central bank demand supports gold, while silver benefits from its industrial and technological uses. Bitcoin, despite its volatility, may attract demand as a decentralized, non-sovereign asset. Investors therefore need to remain selective while considering these assets as potential hedges. Geopolitical risk, persistent inflation, poor productivity and manufacturing growth, the end of sovereign debt as a reserve asset, fiscal challenges in developed nations and the destruction of the middle class through monetary inflation remain the biggest concerns for investors. The next year looks a lot like 2025. Weak growth, insane government spending, monetary expansion and heavy public debt are driving inflationary pressure on assets and reducing potential economic growth. The most important lesson: the only way to defend yourself against the irreversible decline of fiat money is to invest.
Economic growth in Asia and the Pacific has remained resilient, but risks are increasing as a strengthening El Niño brings drier conditions, smaller harvests and reduced hydropower, pushing food and energy prices higher and affecting vulnerable populations. Prolonged energy pressures and financial-market risks underline the need for governments to protect those most exposed. Strong investment, government stimulus and technology exports driven by the global artificial intelligence (AI) investment cycle continue to support growth. The ADB trimmed its regional inflation forecast for 2026 to 4.2% from 4.3%, while raising its 2027 forecast slightly to 3.5% from 3.4%. Both remain above 2025’s 3%. The ADB’s September 2026 outlook identifies two major risks to the region’s growth and inflation: escalating conflicts, particularly in the Middle East and Ukraine, which could keep global energy prices high and volatile and a strong El Niño expected to persist through the first quarter of 2027, potentially increasing energy demand and reducing agricultural output. A sharp correction in AI-related equity valuations, tighter financial conditions and renewed trade-policy uncertainty pose further risks. Sub-regional prospects remain mixed. Stronger-than-expected performance in the first half of 2026 has improved the outlook for developing Southeast Asia, with growth forecasts raised to 4.7% in 2026 and 4.9% in 2027, from 4.6% and 4.8%, respectively. The outlook for developing East Asia, including China, remains unchanged.
For South Asia, the growth forecast for this year is revised up to 6.4% from 6% in July, driven by strong public investment and firm export growth in India. The 2027 projection is lowered by 0.2 percentage points to 6.5%, reflecting lower forecasts for Afghanistan, Bangladesh, India and Nepal amid trade, energy and weather-related shocks. For the Caucasus and Central and West Asia, forecasts are revised down by 0.1 percentage points for both years, to 3.7% and 4.1%, mainly on weaker-than-expected external demand, particularly in Türkiye. Economies in the Pacific face the largest downward revisions, with projections for both years cut by 0.3 percentage points, to 3% and 2.9%, on prolonged energy market disruptions and the expected effects of El Niño on mining and agriculture and inflation risks.
—The writer is Former Civil Servant and Consultant (ILO) & International Organisation for Migration and author of seven books.
