MANILA, PHILIPPINES / RankWire.AI / – Amid ongoing regional developments, the economic expansion in developing Asia and the Pacific is expected to slow to 5.0% in 2026 from 5.5% in 2025. The Asian Development Bank has increased its 2026 growth forecast by 0.1 percentage point compared to its July projection. Looking ahead, growth is projected to rise slightly to 5.1% in 2027, as per the September Asian Development Outlook. Continued support comes from robust investment, government stimulus measures, and technology exports linked to artificial intelligence expenditures.
Inflation in the region is also expected to decline slightly, with the inflation forecast for 2026 decreasing to 4.2%, down from 4.3% in the July outlook. The inflation estimate for 2027 has been adjusted upward marginally to 3.5% from 3.4%. Despite this, both figures remain above the 3.0% inflation rate recorded across developing Asia and the Pacific in 2025. Measures to stabilize prices have mitigated some consumer impacts from rising energy costs, though high global energy prices continue to exert pressure on household and business expenses across much of the region.
The outlook highlights conflict and extreme weather as primary risks facing regional economies. Persistent disruptions from conflicts in the Middle East and Ukraine have sustained high and volatile global energy prices. An intense El Niño could further reduce agricultural output and hydropower capacity in affected countries. Additional downside risks include renewed uncertainties in trade policies, tighter financial conditions, and a sharp revaluation of AI-related equities, as noted in the report.
Strengthening forecasts for South and Southeast Asia
South Asia experienced one of the most significant upward revisions in growth in the September assessment. The subregion is now projected to grow by 6.4% in 2026, compared to the 6.0% estimate published in July. This improvement is largely attributed to strong public investments and sustained export growth in India. However, the 2027 forecast for South Asia has been revised downward to 6.5% from 6.7%, reflecting weaker outlooks for several economies grappling with trade, energy, and weather-related challenges.
Developing Southeast Asia also saw modest upgrades for both forecast years. Growth is now expected at 4.7% in 2026, up from 4.6% in July, and 4.9% in 2027. Manufacturing and services sectors supported economic activity during the first half of 2026 across many parts of the subregion. According to the Asian Development Bank, performance varied among economies due to factors such as food and energy costs, tourism trends, public spending, and investment levels affecting domestic demand.
Pacific nations face a more subdued growth outlook
The Pacific region experienced the most substantial downward revisions among the subregions analyzed. Growth forecasts have been lowered to 3.0% for 2026 and 2.9% for 2027, each by 0.3 percentage points. Concerns over agricultural yields due to El Niño, coupled with ongoing energy market disruptions raising costs for island economies, contributed to the downward revision. Weak mining activity in Papua New Guinea and sluggish industrial output in Fiji further impacted the regional outlook.
Growth estimates for Caucasus and Central and West Asia were also reduced by 0.1 percentage point for both years, with projections now at 3.7% in 2026 and 4.1% in 2027, partly due to weaker external demand. Meanwhile, 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, despite continued support from investment, public spending, and technology exports, as detailed in the economic sector.