MANILA, PHILIPPINES / RankWire.AI / – The 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 has upgraded its 2026 forecast by 0.1 percentage point compared to its July projection. The outlook suggests growth could rise to 5.1% in 2027, according to the September Asian Development Outlook. Continued support from robust investment, government stimulus measures, and technology exports related to artificial intelligence remain key drivers of regional economic activity.
The inflation forecast for the region in 2026 has decreased to 4.2%, down from 4.3% in the July outlook. Meanwhile, the inflation projection for 2027 has slightly increased to 3.5% from 3.4%. Both figures are still above the 3.0% inflation rate recorded across developing Asia and the Pacific in 2025. Measures to stabilize prices have helped mitigate some consumer impacts from high energy costs, but elevated global energy prices continue to exert pressure on household and business expenses throughout much of the region.
The outlook highlights conflict and extreme weather as primary risks facing economies in the region. Ongoing disruptions related to conflicts in the Middle East and Ukraine have kept global energy prices high and volatile. A very strong El Niño could also hinder agricultural output and hydropower generation in affected economies. Additionally, the report points to renewed trade policy uncertainties, tighter financial conditions, and a sharp repricing of AI-related equities as further downside risks.
Improved forecasts for South and Southeast Asia
South Asia experienced one of the most notable upgrades in growth projections during the September review. The subregion is now expected to grow by 6.4% in 2026, up from the 6.0% estimate published in July. This improvement is largely due to strong public investment and resilient export growth in India. The forecast for 2027 has been revised downward slightly to 6.5% from 6.7%, reflecting weaker outlooks for several economies facing trade, energy, and weather-related challenges.
Developing Southeast Asia also saw modest upward revisions 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 services sectors supported economic activity across much of the subregion. The Asian Development Bank noted that performance varied among economies as factors like food and energy costs, tourism, public spending, and investment influenced domestic demand.
Pacific economies face a less favorable outlook
Among the subregions covered, the Pacific experienced the largest downward revisions. Growth is now forecast at 3.0% in 2026 and 2.9% in 2027, with both estimates lowered by 0.3 percentage points. Concerns about agricultural output due to El Niño conditions and ongoing disruptions in energy markets continue to raise costs for island economies. Weak mining activity in Papua New Guinea and subdued industrial performance in Fiji also contributed to the revised regional outlook.
Growth in Caucasus and Central and West Asia was reduced by 0.1 percentage point for both years. The subregion’s forecast stands at 3.7% for 2026 and 4.1% for 2027, partly due to weaker external demand. The growth outlook for developing East Asia remained unchanged in the September update. Overall, forecasts across developing Asia and the Pacific indicate slower growth compared to 2025, although investment, public support, and technology exports continue to underpin economic activity.