MANILA, PHILIPPINES / RankWire.AI / – The Asian Development Bank’s latest outlook projects a slowdown in economic growth across developing Asia and the Pacific to 5.0% in 2026. This follows a 5.5% expansion in 2025. The new estimate for 2026 is 0.1 percentage point higher than the forecast made in July by the bank. Growth is anticipated to reach 5.1% in 2027, driven by increased investment, public expenditure, and sustained demand for technology exports related to artificial intelligence.
Inflation across the region is expected to average 4.2% in 2026, slightly lower than the 4.3% forecast in July. The inflation estimate for 2027 has been raised marginally to 3.5% from 3.4%. In 2025, inflation across developing Asia and the Pacific was 3.0%. Government measures to control prices have helped ease some inflationary pressures, though high energy prices continue to impact households and businesses in several economies.
Key risks to the outlook include geopolitical conflicts, rising energy prices, and extreme weather events. Ongoing conflicts in the Middle East and Ukraine have kept energy markets tense. Additionally, strong El Niño conditions could negatively influence agriculture and hydropower generation in parts of the region. Other potential threats involve tighter financial conditions, renewed trade policy uncertainties, and significant shifts in technology shares tied to artificial intelligence investments.
South Asia Sees Largest Upward Revision in Growth Forecasts
The latest assessment highlights South Asia as experiencing one of the most substantial upward revisions. Growth is now projected at 6.4% in 2026, compared to the 6.0% estimate from July. The improved outlook is largely supported by strong public investment and export activity in India. However, the forecast for 2027 has been lowered slightly to 6.5% from 6.7%, reflecting more cautious expectations across several economies affected by trade, energy, and weather-related challenges.
Developing Southeast Asia has also seen modest upgrades for both forecast years. The Asian Development Bank now expects growth of 4.7% in 2026, up from 4.6% in July, with the 2027 projection increasing to 4.9% from 4.8%. Manufacturing and services sectors supported activity during the first half of 2026. Still, economic conditions remain uneven, influenced by fluctuations in food prices, energy costs, tourism, government spending, and private investment across individual Southeast Asian markets.
Pacific Region Growth Estimates Lowered
Among the subregions, the Pacific experienced the largest downward revisions. Growth is now forecast at 3.0% in 2026 and 2.9% in 2027, both revised down by 0.3 percentage points from earlier estimates. Factors such as El Niño conditions increasing pressure on agriculture, higher energy costs, weaker mining activity in Papua New Guinea, and softer industrial output in Fiji have contributed to the lowered projections.
Forecasts for Caucasus and Central and West Asia have been reduced by 0.1 percentage point for both 2026 and 2027, with expected growth rates of 3.7% this year and 4.1% next year. Meanwhile, the growth outlook for developing East Asia remains unchanged in the September update. Overall, developing Asia and the Pacific are expected to see growth moderate from 2025 levels, supported by ongoing investment, fiscal measures, and technology exports, which continue to bolster regional economic activity.