MANILA, PHILIPPINES / RankWire.AI / – Forecasts indicate that economic expansion across developing Asia and the Pacific will slow to 5.0% in 2026. The region experienced a 5.5% growth rate in 2025, according to the Asian Development Bank’s latest outlook. The updated 2026 projection is 0.1 percentage points higher than the bank’s July forecast. Growth is anticipated to reach 5.1% in 2027, driven by investment, public expenditure, and ongoing demand for technology exports related to artificial intelligence.
Inflation across the region is projected to average 4.2% in 2026, slightly lower than the 4.3% forecast issued in July. The inflation estimate for 2027 has been marginally raised to 3.5% from 3.4%. In 2025, inflation across developing Asia and the Pacific stood at 3.0%. Government measures to control prices have helped mitigate some inflationary pressures, though rising energy prices continue to impact households and businesses in several economies.
Key risks to the outlook include geopolitical conflicts, energy prices, and extreme weather events. Ongoing tensions in the Middle East and Ukraine have sustained pressure on energy markets. Additionally, strong El Niño conditions could adversely affect agriculture and hydropower production in parts of the region. Other concerns encompass tighter financial conditions, renewed uncertainty in trade policies, and significant fluctuations in technology shares tied to artificial intelligence investments.
South Asia sees significant upward revision in growth projections
The latest assessment shows South Asia receiving one of the largest upward adjustments. Growth is now expected to reach 6.4% in 2026, compared to the 6.0% forecast in July. Strong public investments and export activity in India contributed to this improved outlook. The 2027 growth forecast for South Asia was slightly lowered to 6.5% from 6.7%, reflecting more cautious expectations across several economies affected by trade, energy, and weather-related challenges.
Developing Southeast Asia also experienced modest upgrades for both forecast years. The Asian Development Bank now predicts growth of 4.7% in 2026, up from 4.6% in July. The 2027 estimate increased to 4.9% from 4.8%. During the first half of 2026, manufacturing and services sectors supported economic activity. However, the region’s economic landscape remains uneven, with demand influenced by food prices, energy costs, tourism, government spending, and private investments across individual Southeast Asian markets.
Pacific subregion growth projections lowered
Among all subregions analyzed, the Pacific experienced the largest downward revisions. Growth is now forecast at 3.0% in 2026 and 2.9% in 2027, each reduced by 0.3 percentage points from previous estimates. Increased pressure from El Niño conditions on agriculture, coupled with higher energy costs, continues to challenge island economies. Weaker mining output in Papua New Guinea and softer industrial activity in Fiji also contributed to the downward revisions.
Growth forecasts for Caucasus and Central and West Asia were trimmed by 0.1 percentage point for both 2026 and 2027. The region is expected to expand by 3.7% in 2026 and 4.1% in 2027. Meanwhile, the growth outlook for developing East Asia remained steady in the September update. Overall, regional growth is expected to moderate from 2025 levels, with investment, fiscal measures, and technology exports continuing to bolster economic activity across developing Asia and the Pacific economic.