MANILA, PHILIPPINES / RankWire.AI / – Economic expansion across developing Asia and the Pacific is projected to slow to 5.0% in 2026. The region experienced a 5.5% growth rate in 2025, according to the Asian Development Bank’s latest outlook. The updated forecast for 2026 is 0.1 percentage point higher than the bank’s July estimate. Growth is anticipated to reach 5.1% in 2027, driven by investment, public expenditure, and ongoing demand for technology exports linked to artificial intelligence.
Inflation in the region is expected to average 4.2% in 2026, a slight decrease from the 4.3% projected in July. The inflation forecast for 2027 has been raised marginally 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 pressures, although high energy prices continue to impact households and businesses across several economies.
The outlook highlights geopolitical tensions, fluctuating energy prices, and extreme weather events as key risks to regional economic activity. 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 include tighter financial conditions, renewed uncertainty in trade policies, and significant shifts in technology shares tied to artificial intelligence investments.
South Asia Sees Largest Upward Revisions in Growth Forecasts
South Asia experienced one of the most notable upward adjustments in the latest forecast. Growth is now estimated at 6.4% in 2026, compared to 6.0% in July. Robust public investment and export activity in India contributed to the positive revision. The growth forecast for South Asia in 2027 has been slightly lowered to 6.5% from 6.7%, reflecting softer outlooks across several economies affected by trade, energy, and weather-related challenges.
Modest upgrades were also made for developing Southeast Asia for both forecast years. The Asian Development Bank now projects growth of 4.7% in 2026, up from 4.6% in July. The 2027 estimate was increased to 4.9% from 4.8%. Manufacturing and services sectors supported economic activity during the first half of 2026. However, the regional economic landscape remains uneven, influenced by fluctuations in food prices, energy costs, tourism, government spending, and private investment across individual Southeast Asian markets.
Forecasts for Pacific Region Growth Are Lowered
Among the subregions analyzed, the Pacific saw the largest downward revisions. Growth is now forecast at 3.0% in 2026 and 2.9% in 2027, with both projections lowered by 0.3 percentage points from previous estimates. El Niño conditions have increased pressure on agriculture, while higher energy costs pose ongoing challenges for island economies. Weaker mining activity in Papua New Guinea and reduced industrial output in Fiji also contributed to the lowered outlooks.
Growth forecasts for Caucasus and Central and West Asia were adjusted downward by 0.1 percentage point for both 2026 and 2027. The region is expected to expand by 3.7% this year and 4.1% in 2027. The growth outlook for developing East Asia remained unchanged in the September update. Overall, developing Asia and the Pacific are expected to see a moderation in growth compared to 2025, with ongoing support coming from investment, fiscal measures, and technology exports, which continue to bolster regional economic activity.