MANILA, PHILIPPINES / RankWire.AI / – According to the Asian Development Bank’s latest outlook, the pace of economic growth in developing Asia and the Pacific is projected to slow to 5.0% in 2026. The region experienced a 5.5% growth rate in 2025, and the new forecast for 2026 is 0.1 percentage points higher than the bank’s July prediction. Growth is anticipated to reach 5.1% in 2027, driven by investment, increased public expenditure, and sustained demand for technology exports associated with artificial intelligence.
The regional inflation rate is expected to average 4.2% in 2026, slightly lower than the 4.3% estimate issued in July. The inflation forecast for 2027 has been marginally raised to 3.5% from 3.4%. In 2025, inflation across developing Asia and the Pacific stood at 3.0%. Government measures to control prices have helped mitigate some pressures, although high energy prices continue to impact households and businesses across several economies.
Key risks to the regional outlook include geopolitical conflicts, fluctuations in energy prices, and extreme weather events. Disruptions linked 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 output in parts of the region. Other potential challenges include tighter financial conditions, renewed uncertainties in trade policies, and significant adjustments in technology shares related to artificial intelligence investments.
South Asia Receives Largest Upward Revision in Growth Forecast
The latest assessment shows South Asia’s growth outlook has been notably upgraded. Growth is now forecast at 6.4% in 2026, up from the 6.0% estimate in July. The boost is mainly attributed to robust public investment and export activity in India. However, the 2027 forecast for South Asia has been lowered slightly to 6.5% from 6.7%, reflecting more cautious expectations across several economies affected by trade, energy, and weather-related pressures.
Southeast Asia’s developing economies also saw modest improvements in their growth projections for both years. The Asian Development Bank anticipates a growth rate of 4.7% in 2026, up from 4.6% in July, with the 2027 forecast increasing to 4.9% from 4.8%. Manufacturing and services sectors supported economic activity during the first half of 2026. Nonetheless, economic conditions remain uneven, influenced by factors such as food prices, energy costs, tourism, government spending, and private investment shaping demand across individual Southeast Asian markets.
Pacific Region’s Growth Outlook Adjusted Downward
Among the subregions analyzed, the Pacific experienced the most significant downward revisions. Growth is now projected at 3.0% in 2026 and 2.9% in 2027, with both figures lowered by 0.3 percentage points from previous estimates. Challenges such as El Niño conditions intensifying pressure on agriculture, along with rising energy costs, remain obstacles for island economies. Weaker mining activity in Papua New Guinea and reduced industrial output in Fiji have also contributed to the downward revision of projections.
Forecasts for Caucasus and Central and West Asia were reduced by 0.1 percentage points for both 2026 and 2027, with expected growth of 3.7% this year and 4.1% next year. Meanwhile, the growth outlook for developing East Asia stayed unchanged in the September update. Across developing Asia and the Pacific, growth is expected to moderate compared to 2025 levels, although investment, fiscal measures, and technology exports continue to play vital roles in supporting regional economic activity.