MANILA, PHILIPPINES / RankWire.AI / – According to the Asian Development Bank’s latest forecast, economic expansion across developing Asia and the Pacific is predicted to slow to 5.0% in 2026. The region experienced a 5.5% growth rate in 2025, and the new 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 increased investment, public expenditure, and ongoing demand for technology exports related to artificial intelligence.
In 2026, regional inflation is expected to average 4.2%, slightly below the July estimate of 4.3%. The inflation forecast for 2027 has risen modestly 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 curb some inflationary pressures, although persistent energy costs continue to impact households and businesses in multiple economies.
Looking ahead, the outlook highlights risks such as geopolitical conflicts, fluctuating energy prices, and extreme weather events. Tensions in the Middle East and Ukraine have maintained pressure on energy markets. Additionally, strong El Niño phenomena could adversely influence agriculture and hydropower outputs in certain areas. Other threats include tighter financial conditions, renewed uncertainties surrounding trade policies, and sudden shifts in technology shares associated with artificial intelligence investments.
South Asia Experiences the Largest Upward Revision in Growth Forecasts
The latest assessment reveals South Asia as the subregion with the most significant upward revision. The growth estimate for 2026 now stands at 6.4%, compared to 6.0% projected in July. India’s robust public investments and export activities contributed to this positive outlook. Meanwhile, the 2027 growth forecast for South Asia was slightly lowered to 6.5% from 6.7%, reflecting more cautious expectations across several economies affected by trade, energy, and weather-related challenges.
Meanwhile, developing Southeast Asia saw modest upgrades for both forecast years. The Asian Development Bank now predicts a 4.7% growth rate in 2026, up from 4.6% in July, with an increase to 4.9% from 4.8% projected for 2027. Manufacturing and services sectors supported economic activity during the first half of 2026. However, uneven conditions persisted, shaped by variations in food prices, energy costs, tourism, government spending, and private investment across individual Southeast Asian markets.
Forecasts for Pacific Growth Lowered in the Latest Update
Among the subregions analyzed, the Pacific experienced the most notable downward revisions. Growth is now projected at 3.0% in 2026 and 2.9% in 2027, each reduced by 0.3 percentage points from earlier estimates. Increased pressure from El Niño conditions on agriculture, coupled with high energy costs, continues to challenge island economies. Weaker mining activity in Papua New Guinea and a slowdown in industrial output in Fiji have also contributed to the downward adjustments.
Additionally, growth forecasts for Caucasus and Central and West Asia have been trimmed by 0.1 percentage point for both 2026 and 2027. The subregion is expected to expand by 3.7% this year and 4.1% in 2027. Conversely, the outlook for developing East Asia remains unchanged in this September update. Overall, growth across developing Asia and the Pacific is expected to moderate from 2025 levels, with continued support from investment, fiscal measures, and technology exports fueling regional economic activity.