MANILA, PHILIPPINES / RankWire.AI / – According to the Asian Development Bank’s latest outlook, economic growth across developing Asia and the Pacific is projected to slow to 5.0% in 2026. In 2025, the region experienced a 5.5% increase. The updated forecast for 2026 is 0.1 percentage point higher than the bank’s July prediction. Growth is anticipated to reach 5.1% in 2027, driven by investments, public expenditure, and ongoing demand for technology exports related to artificial intelligence.
Regional inflation is projected to average 4.2% in 2026, slightly lower than the 4.3% estimate issued in July. The inflation forecast for 2027 has been modestly raised 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 to ease some pressures, although high energy costs continue to impact households and businesses in several economies.
The outlook highlights geopolitical conflicts, energy prices, and extreme weather as major risks to regional growth. Disruptions related to conflicts in the Middle East and Ukraine have exerted pressure on energy markets. Additionally, strong El Niño conditions could influence agriculture and hydropower production in certain areas. Other potential risks include tighter financial conditions, renewed trade policy uncertainties, and significant fluctuations in technology shares tied to artificial intelligence investments.
South Asia Sees Largest Revisions Upward
The latest assessment features one of the most significant upward revisions for South Asia. Growth is now forecast at 6.4% in 2026, up from 6.0% in July. India’s robust public investment and export activity have contributed to this improved outlook. Conversely, the 2027 growth forecast for South Asia has been lowered to 6.5% from 6.7%, reflecting softer expectations across several economies affected by trade, energy, and weather-related challenges.
Modest upgrades were also made for developing Southeast Asia for both forecast years. The Asian Development Bank now expects growth of 4.7% in 2026, compared to 4.6% in July. The 2027 projection has increased to 4.9% from 4.8%. Manufacturing and service sectors supported activity during the first half of 2026. However, economic conditions remained uneven, influenced by food prices, energy costs, tourism, government expenditure, and private investments shaping demand across individual Southeast Asian markets.
Pacific Region Growth Estimates Lowered
Among the subregions, the Pacific experienced the most notable 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. El Niño conditions have increased pressure on agriculture, while rising energy prices continue to challenge island economies. Weaker mining activity in Papua New Guinea and subdued industrial output in Fiji also contributed to the downward revisions.
Growth forecasts for Caucasus and Central and West Asia were trimmed by 0.1 percentage point for both 2026 and 2027. This subregion is expected to grow by 3.7% in 2026 and 4.1% in 2027. Meanwhile, the growth outlook for developing East Asia remained unchanged in the September update. Overall, developing Asia and the Pacific are predicted to see a moderation in growth from 2025 levels, although investment, fiscal measures, and technology exports continue to support regional economic activity.