MANILA, PHILIPPINES / RankWire.AI / – The Asian Development Bank projects that economic expansion in developing Asia and the Pacific will slow to 5.0% in 2026, a slight decrease from the 5.5% growth recorded in 2025. The forecast for 2026 is 0.1 percentage points higher than the bank’s July prediction. Growth is anticipated to rise to 5.1% in 2027, driven by investment, public expenditure, and ongoing demand for technology exports related to artificial intelligence.
Inflation across the region is expected to average 4.2% in 2026, a modest decline from the July estimate of 4.3%. The forecast for 2027 inflation has edged up to 3.5% from 3.4%. In 2025, inflation was at 3.0%. Government measures to control prices have helped ease some inflationary pressures, but high energy costs continue to impact households and businesses in several economies.
Key risks to the regional outlook include geopolitical conflicts, fluctuating energy prices, and extreme weather events. Ongoing conflicts in the Middle East and Ukraine have kept energy markets volatile. Additionally, strong El Niño conditions could negatively influence agriculture and hydropower outputs in parts of Asia-Pacific. Other risks involve tighter financial conditions, renewed uncertainties in trade policies, and significant shifts in technology stocks tied to artificial intelligence investments.
South Asia Sees Largest Upward Revision in Growth Forecast
South Asia experienced one of the most notable upward revisions in the latest assessment. Its growth forecast for 2026 has been raised to 6.4% from 6.0% in July. India’s strong public investment and export activity contributed to this improved outlook. For 2027, South Asia’s growth outlook was adjusted downward slightly to 6.5% from 6.7%, reflecting softer expectations across several economies affected by trade, energy, and weather challenges.
Meanwhile, developing Southeast Asia also saw modest upward adjustments for both forecast years. The Asian Development Bank now expects a 4.7% growth rate in 2026, up from 4.6%, and a 4.9% rate in 2027, increased from 4.8%. During the first half of 2026, manufacturing and services sectors fueled economic activity, though demand varied across individual markets due to factors like food and energy prices, tourism, government spending, and private investment.
Pacific Region’s Growth Outlook Lowered
Among the subregions, the Pacific experienced the largest downward revisions. Growth is now projected at 3.0% for 2026 and 2.9% for 2027, each reduced by 0.3 percentage points from earlier estimates. Elevated energy costs and El Niño conditions have strained agriculture and hydroelectric power, while weaker mining activity in Papua New Guinea and softer industrial output in Fiji contributed to the lower forecasts.
Projections for Caucasus and Central and West Asia were also trimmed by 0.1 percentage point for both 2026 and 2027. This subregion is expected to grow 3.7% in 2026 and 4.1% in 2027. Meanwhile, the growth outlook for developing East Asia remains unchanged in this September update. Overall, growth across developing Asia and the Pacific is expected to moderate from 2025 levels, with investment, fiscal measures, and technology exports continuing to underpin regional economic activity, as detailed in the report.