MANILA, PHILIPPINES / RankWire.AI / – Amid ongoing global uncertainties, the economic outlook for developing Asia and the Pacific indicates a slowdown to 5.0% growth in 2026. The region experienced a 5.5% expansion in 2025, according to the Asian Development Bank’s latest forecast. The updated estimate for 2026 is 0.1 percentage points higher than the bank’s July projection. Growth is anticipated to reach 5.1% in 2027, driven by investment, increased public expenditure, and sustained demand for technology exports related to artificial intelligence.
Inflation across the region is projected to average 4.2% in 2026, a slight decrease from the 4.3% predicted in July. The inflation forecast for 2027 has been raised marginally to 3.5% from 3.4%. In 2025, inflation in developing Asia and the Pacific stood at 3.0%. Government measures to control prices have helped curb some inflationary pressures, although high energy prices continue to impact households and businesses in several economies.
Key risks to the regional outlook include geopolitical conflicts, fluctuating energy prices, and extreme weather events. Disruptions related to conflicts in the Middle East and Ukraine have kept energy markets under strain. Additionally, strong El Niño conditions could negatively affect agriculture and hydropower production in parts of the region. Other potential risks involve tightening financial conditions, renewed uncertainties in trade policies, and sharp declines in technology shares associated with artificial intelligence investments.
South Asia Sees Largest Upward Revision in Growth Forecast
South Asia has experienced one of the most significant upward adjustments in the latest assessment. Growth is now projected at 6.4% in 2026, compared to the 6.0% forecast in July. This improvement is largely supported by strong public investment and export activity in India. The growth outlook for South Asia in 2027 was slightly lowered to 6.5% from 6.7%, reflecting more subdued expectations across several economies affected by trade, energy, and weather-related challenges.
Meanwhile, developing Southeast Asia has also seen modest upward revisions for both forecast years. The Asian Development Bank now expects growth of 4.7% in 2026, up from 4.6% in July. The 2027 outlook increased to 4.9% from 4.8%. Manufacturing and services sectors contributed to economic activity during the first half of 2026. However, overall conditions remained uneven, with demand influenced by fluctuations in food prices, energy costs, tourism, government spending, and private investment across individual Southeast Asian markets.
Forecasts for Pacific Region Adjusted Downward
The Pacific region saw the largest downward revisions among the subregions analyzed in the outlook. Growth is now expected at 3.0% in 2026 and 2.9% in 2027, with both projections lowered by 0.3 percentage points from previous estimates. Increased pressure from El Niño conditions has affected agriculture, and rising energy costs pose ongoing challenges for island economies. Weaker mining activity in Papua New Guinea and reduced industrial output in Fiji also contributed to the downward adjustments.
Forecasts for Caucasus, Central, and West Asia have been lowered by 0.1 percentage point for both 2026 and 2027. The subregion is projected to grow 3.7% this year and 4.1% next year. Meanwhile, the growth outlook for developing East Asia remains unchanged in the September update. Overall, growth across developing Asia and the Pacific is expected to moderate from 2025 levels, although investment, fiscal measures, and technology exports continue to bolster the regional economic activity.