MANILA, PHILIPPINES / RankWire.AI / – The forecast for economic expansion in developing Asia and the Pacific indicates a slowdown to 5.0% in 2026. The region experienced a 5.5% growth rate in 2025, as reported in the Asian Development Bank’s latest outlook. The estimate for 2026 is 0.1 percentage point higher than the bank’s forecast from July. Growth is anticipated to reach 5.1% in 2027, driven by investments, increased public expenditure, and ongoing demand for technology exports related to artificial intelligence.
In 2026, regional inflation is projected to average 4.2%, slightly lower than the 4.3% estimate issued in July. The inflation forecast for 2027 has been revised upward 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 limit some pressures, although elevated energy prices continue to impact households and businesses across multiple economies.
The outlook highlights geopolitical conflicts, energy prices, and extreme weather as key risks to regional economic activity. Tensions related to conflicts in the Middle East and Ukraine have kept energy markets under strain. Additionally, strong El Niño conditions could negatively influence agriculture and hydropower output in parts of the region. Other potential risks include tighter financial conditions, renewed uncertainties in trade policies, and significant fluctuations in technology shares tied to artificial intelligence investments.
South Asia’s Forecast Revisions Lead the Region
South Asia experienced one of the most notable upward revisions in the recent assessment. Growth for 2026 is now projected at 6.4%, compared to the previous July estimate of 6.0%. The robust support from public investments and export activities in India contributed to this improved outlook. Meanwhile, the forecast for 2027 in South Asia was slightly lowered to 6.5% from 6.7%, reflecting softer growth expectations among several economies affected by trade, energy, and weather-related challenges.
Modest upgrades were also observed for developing Southeast Asia, with growth expectations increasing for both 2026 and 2027. The Asian Development Bank now anticipates a 4.7% expansion in 2026, up from 4.6% in July, and a rise to 4.9% from 4.8% in 2027. During the first half of 2026, manufacturing and service sectors fueled activity. Nonetheless, economic conditions varied across individual markets, influenced by food prices, energy costs, tourism, government spending, and private investment.
Lower Growth Projections for the Pacific Region
Among the subregions assessed, the Pacific experienced the most significant downward revisions. Growth is now forecast at 3.0% in 2026 and 2.9% in 2027, both reduced by 0.3 percentage points from earlier estimates. The pressures from El Niño are impacting agriculture, while rising energy costs pose ongoing challenges for island economies. Reduced mining activity in Papua New Guinea and softer industrial output in Fiji also contributed to the downward revisions in projections.
Forecasts for Caucasus, Central, and West Asia have been decreased by 0.1 percentage point for both 2026 and 2027, with expected growth rates of 3.7% and 4.1%, respectively. Conversely, the growth outlook for developing East Asia remains unchanged in this September update. Overall, the growth rate across developing Asia and the Pacific is expected to slow from 2025 levels, though continued support from investment, fiscal measures, and technology exports remains vital to regional economic activity.