MANILA, PHILIPPINES / RankWire.AI / – The Asian Development Bank’s latest outlook indicates that economic expansion in developing Asia and the Pacific is expected to slow to 5.0% in 2026. After a 5.5% increase in 2025, the region’s growth rate has been adjusted slightly upward by 0.1 percentage point from the bank’s July forecast. The forecast for 2027 suggests a growth rate of 5.1%, driven by investment, public expenditure, and ongoing demand for technology exports related to artificial intelligence.
Inflation across the region is projected to average 4.2% in 2026, slightly lower than the 4.3% estimate made in July. The inflation forecast for 2027 has been nudged up marginally to 3.5% from 3.4%. In 2025, inflation stood at 3.0%. Government measures to control prices have helped mitigate some inflationary pressures, though rising energy prices continue to impact households and businesses in multiple economies.
Key risks to the regional outlook include geopolitical conflicts, energy price fluctuations, and extreme weather events. Tensions in the Middle East and Ukraine have kept energy markets volatile. Additionally, strong El Niño conditions could negatively influence agriculture and hydropower production in certain parts of the region. Other potential threats encompass tighter financial conditions, renewed uncertainties in trade policies, and a significant correction in technology stocks tied to artificial intelligence investments.
South Asia Experiences Notable Upward Revision in Growth Forecast
The latest assessment shows South Asia receiving one of the largest upward revisions. Growth is now projected at 6.4% in 2026, up from 6.0% in July. This improvement is largely supported by robust public investments and increased export activity in India. The growth forecast for South Asia in 2027 has been slightly lowered to 6.5% from 6.7%, reflecting softer outlooks across several economies affected by trade, energy, and weather-related challenges.
Developing Southeast Asia also saw modest upward adjustments for both 2026 and 2027. The Asian Development Bank now expects growth of 4.7% in 2026, an increase from 4.6% in July, with the 2027 forecast rising to 4.9% from 4.8%. Manufacturing and services contributed to activity during the first half of 2026, though economic conditions remained uneven due to fluctuations in food prices, energy costs, tourism, government spending, and private investments across individual Southeast Asian markets.
Pacific Region Growth Outlook Lowered in Updated Projections
Among the subregions, the Pacific experienced the most significant downward revisions. Growth is now forecast at 3.0% in 2026 and 2.9% in 2027, each reduced by 0.3 percentage points from previous estimates. The impact of El Niño has heightened pressure on agriculture, and rising energy costs remain a concern for island economies. Weaker mining activity in Papua New Guinea and softer industrial output in Fiji have also contributed to the downward revisions.
Forecasts for Caucasus and Central and West Asia were trimmed by 0.1 percentage point for both 2026 and 2027, with growth expected at 3.7% this year and 4.1% next year. Meanwhile, 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 bolster regional economic activity.