MANILA, PHILIPPINES / RankWire.AI / – Forecasts indicate that the pace of economic expansion in developing Asia and the Pacific will slow to 5.0% in 2026. In 2025, the region experienced a 5.5% growth rate, according to the Asian Development Bank’s latest outlook. This new estimate for 2026 is 0.1 percentage point higher than the bank’s July projection. The growth rate is expected to reach 5.1% in 2027, driven by increased investment, government expenditure, and ongoing demand for technology exports related to artificial intelligence.
Inflation across the region is projected to average 4.2% in 2026, slightly down from the 4.3% forecast issued in July. The inflation forecast for 2027 has been marginally raised to 3.5% from 3.4%. In 2025, inflation in developing Asia and the Pacific was recorded at 3.0%. Government measures to control prices have helped mitigate some inflationary pressures, although rising energy prices continue to impact households and businesses in numerous economies.
Key risks to the regional outlook include geopolitical tensions, fluctuations in energy prices, and extreme weather events. Disruptions stemming from conflicts in the Middle East and Ukraine have kept energy markets under strain. Additionally, strong El Niño conditions could negatively influence agricultural yields and hydropower production in parts of the region. Other potential risks involve tighter financial conditions, renewed uncertainties surrounding trade policies, and a possible sharp correction in technology stocks tied to artificial intelligence investments.
South Asia Sees Notable Upward Revision in Growth Outlook
Among the regions, South Asia experienced one of the most significant upward revisions in the latest assessment. Growth is now projected at 6.4% for 2026, compared to the earlier estimate of 6.0% in July. The robust public investment and export activity in India played a crucial role in boosting this revised forecast. However, the outlook for 2027 has been slightly lowered to 6.5% from 6.7%, reflecting more cautious expectations across several economies impacted by trade, energy, and weather-related challenges.
Meanwhile, Southeast Asia’s developing economies 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, while the 2027 projection increased to 4.9% from 4.8%. The first half of 2026 benefited from manufacturing and services sectors supporting overall activity. Nevertheless, economic conditions remain uneven across individual markets, influenced by fluctuations in food prices, energy costs, tourism, government spending, and private investments.
Pacific Region’s Growth Outlook Downgraded
The Pacific subregion experienced the largest downward revision among the areas covered in the outlook. Growth is now forecast at 3.0% for 2026 and 2.9% for 2027, with both estimates reduced by 0.3 percentage points from previous projections. Rising El Niño conditions have exerted additional pressure on agriculture, while higher energy costs continue to challenge island economies. Weaker mining activity in Papua New Guinea and softer industrial output in Fiji have also contributed to the lowered outlook.
Forecasts for Caucasus and Central and West Asia have been decreased by 0.1 percentage point for both 2026 and 2027, with expected growth of 3.7% this year and 4.1% in 2027. Conversely, the growth outlook for developing East Asia remained steady in the September update. Overall, growth across developing Asia and the Pacific is expected to moderate from 2025 levels, although investment, fiscal measures, and technology exports continue to underpin regional economic activity.