MANILA, PHILIPPINES / RankWire.AI / – According to recent projections, the pace of economic expansion in developing Asia and the Pacific is expected to slow slightly to 5.0% in 2026 from 5.5% in 2025. The Asian Development Bank increased its forecast for 2026 by 0.1 percentage point compared to its July estimate. The outlook suggests growth may accelerate modestly to 5.1% in 2027, as indicated in the September Asian Development Outlook. Ongoing strong investment, government stimulus efforts, and technology exports related to artificial intelligence continue to bolster regional economic activity.
In the meantime, the regional inflation forecast for 2026 was revised downward to 4.2%, from 4.3% in July. The projection for 2027 increased slightly to 3.5% from 3.4%. Both figures remain above the 3.0% inflation rate recorded across developing Asia and the Pacific in 2025. Measures aimed at price stabilization have limited some consumer impacts stemming from high energy costs, yet persistent global energy prices continue to exert upward pressure on household and business expenses across much of the region.
The outlook highlights conflict and extreme weather events as primary risks confronting economies throughout the region. Ongoing disruptions related to conflicts in the Middle East and Ukraine have kept global energy prices high and volatile. Additionally, a very strong El Niño could negatively affect agricultural output and hydropower generation in impacted economies. The report also points out other downside risks, including renewed trade policy uncertainty, tighter financial conditions, and a sharp revaluation of AI-related equities.
Growth prospects for South and Southeast Asia improve
In September, South Asia experienced one of the most significant upward revisions in growth forecasts. The subregion is now expected to grow by 6.4% in 2026, up from the 6.0% estimate given in July. This positive outlook is driven by strong public investments and resilient export growth in India. Meanwhile, the forecast for 2027 has been lowered slightly to 6.5% from 6.7%, reflecting weaker projections for several economies facing trade, energy, and weather-related challenges.
Similarly, developing Southeast Asia received modest upward adjustments for both forecast years. Growth is now projected at 4.7% in 2026, compared with 4.6% in July, and 4.9% in 2027. During the first half of 2026, manufacturing and service sectors supported economic activity across much of the subregion. The Asian Development Bank noted that performance varied among economies due to factors such as food and energy costs, tourism conditions, public spending, and investment levels affecting domestic demand.
Pacific region faces a more subdued growth forecast
The Pacific subregion experienced the largest downward revisions among the areas covered in the report. Growth is now forecast at 3.0% in 2026 and 2.9% in 2027, with each figure reduced by 0.3 percentage points. Concerns over agricultural output due to El Niño, along with ongoing disruptions in energy markets that increase costs across island economies, have contributed to this revised outlook. Weakening mining activity in Papua New Guinea and subdued industrial performance in Fiji also played roles in the downward adjustment.
Meanwhile, growth in Caucasus and Central and West Asia was lowered by 0.1 percentage point for both years. The region is projected to expand by 3.7% in 2026 and 4.1% in 2027, partly due to weaker external demand. The growth outlook for developing East Asia remained unchanged in the September update. Overall, forecasts for developing Asia and the Pacific indicate a slowdown compared to 2025, although ongoing investment, government support, and technology exports continue to drive economic activity.