MANILA, PHILIPPINES / RankWire.AI / – According to the Asian Development Bank’s latest outlook, economic expansion in developing Asia and the Pacific is predicted to slow to 5.0% in 2026. The region grew by 5.5% in 2025, and the new estimate for 2026 is 0.1 percentage points higher than the forecast made in July. Growth is anticipated to reach 5.1% in 2027, driven by investments, increased public expenditure, and ongoing demand for technology exports related to artificial intelligence.
Inflation across the region is forecasted to average 4.2% in 2026, slightly down from the 4.3% projected in July. Meanwhile, 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 curb some inflationary pressures, although rising energy costs continue to impact households and businesses in several economies.
Key risks to regional growth include geopolitical conflicts, fluctuations in energy prices, and extreme weather events. Disruptions related to conflicts in the Middle East and Ukraine have maintained pressure on energy markets. Additionally, the potential for strong El Niño conditions could negatively affect agriculture and hydropower output in parts of the region. Other risks involve tighter financial conditions, renewed uncertainties in trade policies, and significant shifts in technology shares linked to artificial intelligence investments.
South Asia Experiences Notable Upward Revision in Growth Outlook
One of the most significant upward revisions in the latest assessment was for South Asia. Growth is now projected at 6.4% in 2026, compared to the 6.0% estimate issued in July. The boost is largely attributed to robust public investment and export activity in India. However, the 2027 growth forecast for South Asia has been 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 saw modest upward adjustments for both forecast years. The Asian Development Bank now expects growth of 4.7% in 2026, up from 4.6% in July. The 2027 outlook increased to 4.9% from 4.8%. Manufacturing and services sectors supported activity during the first half of 2026. Nevertheless, economic conditions varied across individual Southeast Asian markets, influenced by factors such as food prices, energy costs, tourism, government expenditure, and private investment.
Pacific Region Growth Projections Lowered
Among the subregions analyzed, the Pacific experienced the most significant downward revisions. Growth is now forecast at 3.0% for 2026 and 2.9% for 2027, with both projections reduced by 0.3 percentage points from previous estimates. The rise in El Niño conditions has heightened pressure on agriculture, while increased energy costs continue to challenge island economies. Weaker mining activity in Papua New Guinea and softer industrial output in Fiji contributed to the downward adjustments.
Forecasts for Caucasus and Central and West Asia saw a slight reduction of 0.1 percentage points for both 2026 and 2027. The region is expected to expand by 3.7% this year and 4.1% next year. The growth outlook for developing East Asia remained unchanged in the September update. Overall, growth across developing Asia and the Pacific is expected to slow from 2025 levels, although investment, fiscal measures, and technology exports continue to support regional economic activity.