MANILA, PHILIPPINES / RankWire.AI / – Economic expansion across developing Asia and the Pacific is expected to slow to 5.0% in 2026 from 5.5% in 2025. The Asian Development Bank increased its 2026 growth estimate by 0.1 percentage points compared to its July projection. The outlook for 2027 indicates a modest rise to 5.1%, as per the September Asian Development Outlook. Ongoing support comes from robust investments, government stimulus measures, and technology exports linked to artificial intelligence investments.
Inflation in the region is forecasted to decrease slightly to 4.2% in 2026 from 4.3% in July, while the 2027 inflation estimate marginally rises to 3.5% from 3.4%. Both figures remain above the 3.0% inflation rate recorded across developing Asia and the Pacific in 2025. Measures to stabilize prices have helped mitigate some consumer impacts from high energy costs, though elevated global energy prices continue to strain household and business expenses throughout much of the region.
The report highlights conflict and extreme weather as key risks to regional economies. Ongoing disruptions from conflicts in the Middle East and Ukraine have kept energy prices volatile and high. Additionally, a strong El Niño could reduce agricultural yields and hydropower output in affected nations. Other downside risks include renewed trade policy uncertainties, tighter financial conditions, and a sharp decline in AI-related equities.
Forecasts for South and Southeast Asia Show Improvement
South Asia experienced one of the most notable growth upgrades in the September review. The subregion is projected to grow by 6.4% in 2026, up from the 6.0% estimate in July. Strong public investments and steady export growth in India contributed to this upward revision. However, the 2027 outlook for South Asia has been lowered to 6.5% from 6.7%, due to weaker prospects for economies facing trade, energy, and weather challenges.
Southeast Asia also received slight improvements for both forecast years. Growth is now expected to reach 4.7% in 2026, compared to 4.6% in July, and 4.9% in 2027. Manufacturing and services drove activity in the first half of 2026 across much of the subregion. The Asian Development Bank noted that economic performance varied due to factors such as food and energy costs, tourism trends, and public spending, which impacted domestic demand.
Pacific Economies Face a More Cautious Outlook
The Pacific region experienced the most significant downward revisions among the subregions. Growth is now forecast at 3.0% for 2026 and 2.9% for 2027, with both estimates reduced by 0.3 percentage points. Concerns over agricultural output due to El Niño and ongoing energy market disruptions raising costs across island economies contributed to the downgrade. Weak mining activity in Papua New Guinea and subdued industrial performance in Fiji also influenced the revised outlook.
Growth projections for Caucasus and Central and West Asia were lowered by 0.1 percentage points for both years. The subregion is now expected to expand by 3.7% in 2026 and 4.1% in 2027, partly due to weaker external demand. Meanwhile, the growth outlook for developing East Asia remained stable in the September update. Overall, forecasts for developing Asia and the Pacific suggest slower growth than in 2025, though ongoing investment, government support, and technology exports continue to underpin economic activity.