MANILA, PHILIPPINES / RankWire.AI / – Economic expansion in developing Asia and the Pacific is expected to slow to 5.0% in 2026, down from 5.5% in 2025. The Asian Development Bank increased its forecast for 2026 by 0.1 percentage points from its July projection. According to the September Asian Development Outlook, growth is anticipated to slightly rise to 5.1% in 2027. Robust investment, government stimulus measures, and technology exports linked to artificial intelligence continue to bolster regional economic activity.
The inflation forecast for the region in 2026 was lowered to 4.2%, from 4.3% in the July outlook. The inflation estimate for 2027 increased marginally to 3.5% from 3.4%. Despite these adjustments, both figures remain above the 3.0% inflation rate recorded across developing Asia and the Pacific in 2025. Measures aimed at price stabilization have mitigated some consumer impacts from rising energy costs, though high global energy prices still exert pressure on household and business expenses across much of the region.
The report highlights conflict and extreme weather as primary risks threatening regional economies. Ongoing disruptions related to conflicts in the Middle East and Ukraine have kept global energy prices elevated and volatile. An intense El Niño event could also reduce agricultural yields and hydropower generation in affected nations. Additional downside risks include renewed trade policy uncertainties, tighter financial conditions, and a sharp revaluation of AI-related equities, the report notes.
South and Southeast Asia see upgraded growth forecasts
South Asia experienced one of the most significant upward revisions in its growth outlook in the September assessment. The subregion is now projected to grow by 6.4% in 2026, up from the 6.0% estimate published in July. Strong public investment and solid export growth in India contributed to this upward revision. For 2027, South Asia’s growth outlook was slightly lowered to 6.5% from 6.7%, reflecting weaker projections for several economies facing trade, energy, and weather-related pressures.
Similarly, developing Southeast Asia received modest upgrades for both forecast years. Growth is now expected to reach 4.7% in 2026, up from 4.6% in July, and 4.9% in 2027. Manufacturing and services sectors supported economic activity during the first half of 2026 across much of this subregion. The Asian Development Bank pointed out that performance varies among economies, influenced by food and energy costs, tourism conditions, public expenditure, and investment levels affecting domestic demand.
Outlook for Pacific economies dims
The Pacific experienced the largest downward adjustments among the subregions analyzed. Growth is now forecast at 3.0% in 2026 and 2.9% in 2027, with both estimates reduced by 0.3 percentage points. Concerns about agricultural output have increased due to El Niño conditions, while ongoing disruptions in energy markets continue to raise costs for island economies. Weak mining activity in Papua New Guinea and subdued industrial performance in Fiji also contributed to the downward revision.
Growth forecasts for Caucasus and Central and West Asia were lowered by 0.1 percentage points for both years. The subregion is projected to expand by 3.7% in 2026 and 4.1% in 2027, partly due to weaker external demand. Meanwhile, the growth outlook for developing East Asia remained unchanged in the September update. Overall, forecasts indicate slower growth than in 2025 across developing Asia and the Pacific, though investment, public support, and technology exports continue to drive economic activity.