MANILA, PHILIPPINES / RankWire.AI / – The Asian Development Bank’s latest outlook indicates that economic growth across developing Asia and the Pacific is anticipated to decelerate to 5.0% in 2026, following an expansion of 5.5% in 2025. This new estimate for 2026 is 0.1 percentage points higher than the forecast issued in July. The projection for 2027 suggests growth of 5.1%, driven by investments, public expenditure, and ongoing demand for technology exports associated with artificial intelligence.
Inflation in the region is expected to average 4.2% in 2026, a slight decrease from the 4.3% forecast made in July. Meanwhile, the inflation outlook for 2027 has been marginally raised to 3.5% from 3.4%. In 2025, inflation across developing Asia and the Pacific was recorded at 3.0%. Government measures to control prices have contributed to easing some pressures, although rising energy prices continue to impact households and businesses in several economies.
The outlook highlights geopolitical conflicts, fluctuations in energy prices, and extreme weather as significant risks to regional economic performance. Disruptions stemming from conflicts in the Middle East and Ukraine have sustained pressure on energy markets. Additionally, strong El Niño conditions could negatively influence agricultural output and hydropower in parts of the region. Other potential threats include tighter financial conditions, renewed uncertainties in trade policies, and a sharp correction in technology stocks related to artificial intelligence investments.
South Asia Experiences Largest Upward Revision in Regional Outlook
Among the subregions, South Asia saw one of the most substantial upward adjustments in the latest forecast, with growth now projected at 6.4% in 2026, compared to the 6.0% estimate in July. The upward revision was supported by robust public investments and strong export activities in India. However, the outlook for 2027 has been slightly lowered to 6.5% from 6.7%, reflecting more cautious expectations across several economies influenced by trade, energy, and weather-related challenges.
Meanwhile, Southeast Asia’s developing economies also experienced modest improvements in their forecasts for both years. The Asian Development Bank now anticipates growth of 4.7% in 2026, up from 4.6% in July, with the 2027 projection increasing slightly to 4.9% from 4.8%. Manufacturing and services sectors contributed to activity during the first half of 2026, although economic conditions remain uneven as factors such as food prices, energy costs, tourism, government expenditure, and private investments continue to influence demand across individual Southeast Asian markets.
Pacific Region Growth Projections Lowered
The Pacific subregion experienced the largest downward revisions among those covered in the outlook, with growth estimates revised to 3.0% in 2026 and 2.9% in 2027, both reduced by 0.3 percentage points from previous forecasts. The increased pressure from El Niño conditions on agriculture, along with elevated energy prices, remains a challenge for island economies. Weaker mining activity in Papua New Guinea and softer industrial output in Fiji also contributed to the downward adjustments in the projections.
Forecasts for the Caucasus and Central and West Asia have been reduced by 0.1 percentage point for both 2026 and 2027, with expected growth of 3.7% this year and 4.1% next year. Conversely, the growth outlook for developing East Asia stayed unchanged in the September update. Overall, the growth rate across developing Asia and the Pacific is expected to moderate from 2025 levels, although investment, fiscal measures, and exports of technology continue to bolster regional economic activity.