MANILA, PHILIPPINES / RankWire.AI / – The Asian Development Bank’s latest outlook forecasts a slowdown in economic expansion across developing Asia and the Pacific to 5.0% in 2026. This marks a slight decrease from the 5.5% growth recorded in 2025. The bank’s new estimate for 2026 is 0.1 percentage point higher than its July projection. Growth is expected to pick up to 5.1% in 2027, driven by increased investment, government expenditure, and ongoing demand for technology exports related to artificial intelligence.
Inflation in the region is projected to average 4.2% in 2026, slightly lower than the 4.3% forecast issued in July. Meanwhile, the inflation outlook for 2027 has risen marginally 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 high energy prices continue to impact households and businesses in several economies.
Geopolitical conflicts, fluctuations in energy prices, and extreme weather events are highlighted as primary risks to regional economic activity. Ongoing tensions in the Middle East and Ukraine have kept energy markets under strain. Additionally, strong El Niño conditions could disrupt agriculture and hydropower output in parts of the region. Other risks involve tighter financial conditions, renewed uncertainties in trade policies, and potential sharp corrections in technology shares linked to artificial intelligence investments.
South Asia Experiences Largest Upward Revision in Growth Forecast
The latest assessment shows South Asia receiving one of the most significant upward revisions. Growth for the region is now projected at 6.4% in 2026, up from 6.0% in July. This positive outlook is supported by robust public investment and export activity in India. However, the 2027 growth forecast for South Asia has been lowered to 6.5% from 6.7%, reflecting softer expectations across several economies facing trade, energy, and weather-related challenges.
Developing Southeast Asia also saw modest upgrades for both forecast years. The Asian Development Bank now anticipates growth of 4.7% in 2026, up from 4.6% in July, and a rise to 4.9% from 4.8% in 2027. During the first half of 2026, manufacturing and services sectors supported economic activity. Nonetheless, economic conditions remained uneven across individual markets, influenced by variations in food prices, energy costs, tourism, government spending, and private investment.
Pacific Region Growth Outlook Revised Downward
Among the subregions analyzed, the Pacific experienced the largest downward revisions in growth forecasts. The projection now stands at 3.0% for 2026 and 2.9% for 2027, each lowered by 0.3 percentage points from previous estimates. Increased pressure from El Niño conditions on agriculture, along with higher energy costs, continues to challenge island economies. Weaker mining activity in Papua New Guinea and subdued industrial output in Fiji also contributed to the downward adjustments.
Forecasts for the Caucasus and Central and West Asia have been trimmed by 0.1 percentage point for both 2026 and 2027. The subregion is expected to grow by 3.7% this year and 4.1% next year. Meanwhile, the growth outlook for developing East Asia remained unchanged in the September update. Overall, regional growth across developing Asia and the Pacific is expected to slow from 2025 levels, although investment, fiscal measures, and exports of technology continue to underpin economic activity in the area.