MANILA, PHILIPPINES / RankWire.AI / – Developing Asia and the Pacific are expected to see their economic expansion slow to 5.0% in 2026, down from 5.5% in 2025. The Asian Development Bank increased its projection for 2026 by 0.1 percentage point compared to its July estimate. Projections indicate a slight rise to 5.1% in 2027, as per the September Asian Development Outlook. Ongoing support for regional activity comes from robust investment, government stimulus initiatives, and exports driven by artificial intelligence technology.
The regional inflation forecast for 2026 was lowered to 4.2%, compared to 4.3% in July. Meanwhile, the inflation estimate for 2027 increased marginally to 3.5% from 3.4%. Both figures remain above the 3.0% inflation rate recorded across developing Asia and the Pacific in 2025. Price stabilization measures have helped mitigate some consumer impacts of high energy costs, although 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 confronting regional economies. Persistent 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 impair agricultural yields and hydropower generation in affected nations. The report also points to renewed trade policy uncertainty, tighter financial conditions, and a sharp revaluation of AI-related equities as other potential downside risks.
Enhanced forecasts for South and Southeast Asia
South Asia experienced one of the most significant upward revisions in its growth outlook in the September assessment. The subregion is now projected to grow by 6.4% in 2026, an increase from the 6.0% estimate issued in July. Strong public investment and steady export growth in India contributed to this upward adjustment. Conversely, the 2027 forecast for South Asia decreased to 6.5% from 6.7%, reflecting weaker expectations for several economies facing trade, energy, and weather-related challenges.
Similarly, developing Southeast Asia received modest upward revisions for both forecast years. Growth is now expected at 4.7% in 2026, up from 4.6% in July, and 4.9% in 2027. During the first half of 2026, manufacturing and services sectors supported activity across much of this subregion. The Asian Development Bank noted that performance varied among economies, influenced by food and energy costs, tourism conditions, public spending, and investment levels affecting domestic demand.
Pacific region faces a more subdued outlook
Among the subregions analyzed in the report, the Pacific experienced the largest downward revisions. Growth is now forecast at 3.0% in 2026 and 2.9% in 2027, with both projections lowered by 0.3 percentage points. Concerns about agricultural output due to El Niño conditions, along with ongoing energy market disruptions increasing costs across island nations, have contributed to this revised outlook. Weak mining activity in Papua New Guinea and subdued industrial performance in Fiji also played roles in the downward adjustment.
Growth projections for Caucasus and Central and West Asia were reduced by 0.1 percentage point for both years, with forecasts at 3.7% for 2026 and 4.1% for 2027, partly due to weaker external demand. Meanwhile, the outlook for developing East Asia remained unchanged in the September update. Overall, forecasts across developing Asia and the Pacific indicate a slowdown compared to 2025, although investment, public support, and technology exports continue to underpin economic activity.