MANILA, PHILIPPINES / RankWire.AI / – The Asian Development Bank’s latest outlook predicts that economic expansion across developing Asia and the Pacific will slow to 5.0% in 2026. This marks a slight decrease from the 5.5% growth experienced in 2025. The forecast for 2026 is 0.1 percentage point higher than the bank’s July projection, with growth expected to reach 5.1% in 2027, driven by investment, increased public expenditure, and ongoing demand for technology exports related to artificial intelligence.
Inflation in the region is anticipated to average 4.2% in 2026, a decrease from the 4.3% forecast issued in July. The inflation estimate for 2027 has been revised upward slightly to 3.5% from 3.4%. In 2025, inflation across developing Asia and the Pacific stood at 3.0%. While government measures to regulate prices have helped mitigate some inflationary pressures, rising energy costs continue to impact households and businesses across numerous economies.
Key risks to the regional outlook include geopolitical conflicts, volatile energy prices, and extreme weather events. Ongoing conflicts in the Middle East and Ukraine have kept energy markets under strain. Additionally, the possibility of strong El Niño conditions could negatively influence agriculture and hydropower output in certain areas. Other risks involve tightening financial conditions, renewed uncertainties in trade policies, and significant fluctuations in technology shares associated with artificial intelligence investments.
South Asia Sees Largest Upward Revisions in Growth Forecasts
South Asia experienced one of the most notable upward revisions in the latest assessment. The region’s growth is now projected to reach 6.4% in 2026, compared to the earlier estimate of 6.0% in July. The upward outlook is supported by robust public investments and increased export activity, especially in India. Conversely, the growth forecast for 2027 has been lowered slightly to 6.5% from 6.7%, reflecting softer expectations for several economies affected by trade, energy, and weather-related challenges.
Modest upward revisions were also made for developing Southeast Asia for both forecast years. The Asian Development Bank now expects growth of 4.7% in 2026, up from 4.6% in July, with the 2027 projection increasing to 4.9% from 4.8%. Manufacturing and services sectors supported economic activity during the first half of 2026. However, conditions remain uneven, influenced by fluctuations in food prices, energy costs, tourism, government spending, and private investment across individual Southeast Asian markets.
Pacific Region Growth Estimates Lowered
The Pacific subregion experienced the largest downward revisions in the outlook. Growth is now forecast at 3.0% in 2026 and 2.9% in 2027, each reduced by 0.3 percentage points from previous estimates. The impact of El Niño has heightened pressure on agriculture, while rising energy costs continue to challenge island economies. Weakening mining activity in Papua New Guinea and declining industrial output in Fiji also contributed to the downward revisions.
Growth projections for Caucasus and Central and West Asia were decreased by 0.1 percentage point for both 2026 and 2027. The region is expected to expand by 3.7% this year and 4.1% next year. Meanwhile, the growth outlook for developing East Asia remained unchanged in the September update. Across developing Asia and the Pacific, growth is expected to moderate from 2025 levels, with investment, fiscal measures, and technology exports continuing to bolster regional economic activity.