MANILA, PHILIPPINES / RankWire.AI / – Forecasts indicate that economic expansion across developing Asia and the Pacific will decelerate to 5.0% in 2026. The region experienced a 5.5% growth rate in 2025, according to the Asian Development Bank’s latest outlook. Notably, the 2026 estimate is 0.1 percentage point higher than the bank’s July projection. Growth is anticipated to reach 5.1% in 2027, driven by investment, government expenditure, and sustained demand for technology exports associated with artificial intelligence.
Inflation in the region is expected to average 4.2% in 2026, slightly lower than the 4.3% estimated in July. The inflation forecast for 2027 was marginally raised to 3.5% from 3.4%. In 2025, inflation across developing Asia and the Pacific stood at 3.0%. Government measures on prices have helped contain some inflationary pressures, although rising energy costs continue to impact households and businesses throughout several economies.
The outlook highlights key risks to regional activity, including geopolitical conflicts, fluctuations in 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 influence agriculture and hydropower production in parts of the region. Other potential risks encompass tighter financial conditions, renewed uncertainties in trade policies, and a sharp correction in technology stocks linked to artificial intelligence investments.
South Asia Receives Largest Upward Revision in Regional Outlook
Among the subregions, South Asia saw one of the most significant upward revisions. The growth forecast for 2026 is now 6.4%, up from 6.0% in July. This improvement is largely supported by robust public investment and export activity in India. Conversely, the 2027 forecast for South Asia was slightly lowered to 6.5% from 6.7%, reflecting more cautious expectations across economies affected by trade, energy, and weather-related challenges.
Meanwhile, developing Southeast Asia also experienced modest upward revisions for both forecast years. The Asian Development Bank now projects growth of 4.7% in 2026, up from 4.6% in July, with the 2027 outlook increasing to 4.9% from 4.8%. Manufacturing and services sectors supported activity during the first half of 2026. Nonetheless, economic conditions remained uneven, influenced by factors such as food prices, energy costs, tourism, government expenditure, and private sector investment shaping demand across individual Southeast Asian markets.
Lower Growth Expectations for Pacific Subregion
Among the subregions analyzed, the Pacific experienced the most significant downward revisions. Growth is now forecast at 3.0% for 2026 and 2.9% for 2027, with both projections reduced by 0.3 percentage points from previous estimates. The impact of El Niño conditions has heightened pressures on agriculture, while elevated energy prices remain a challenge for island economies. Additionally, weakened mining activity in Papua New Guinea and softer industrial output in Fiji contributed to the downward revision.
Projections for the Caucasus and Central and West Asia were also lowered by 0.1 percentage point for both 2026 and 2027, with expected growth rates of 3.7% this year and 4.1% next year. Meanwhile, the growth outlook for developing East Asia remained unchanged in the September update. Overall, growth in developing Asia and the Pacific is anticipated to slow from 2025 levels, although ongoing investment, fiscal measures, and technology exports continue to underpin regional economic activity.