MANILA, PHILIPPINES / RankWire.AI / – The economic expansion in developing Asia and the Pacific is expected to slow to 5.0% in 2026, down from 5.5% in 2025. The Asian Development Bank has increased its 2026 growth forecast by 0.1 percentage points from its July prediction. For 2027, growth is projected to rise slightly to 5.1%, according to the September Asian Development Outlook. Ongoing support comes from robust investment, government stimulus measures, and technology exports related to artificial intelligence spending.
The regional inflation estimate for 2026 has decreased to 4.2%, compared to 4.3% in July. The inflation forecast for 2027 has risen marginally to 3.5% from 3.4%. Both figures stay above the 3.0% inflation rate recorded across developing Asia and the Pacific in 2025. Price stabilization efforts have limited some consumer impacts from high energy costs, though elevated global energy prices still strain household and business expenses across much of the region.
The outlook highlights conflict and extreme weather as primary risks to regional economies. Ongoing disruptions from conflicts in the Middle East and Ukraine have kept global energy prices high and unstable. A very strong El Niño could also reduce agricultural output and hydropower generation in affected economies. Additional downside risks include renewed trade policy uncertainty, tighter financial conditions, and a sharp repricing of AI-related equities, the report notes.
Forecasts for South and Southeast Asia Show Improvement
South Asia saw one of the largest growth upgrades in the September report. The subregion is now expected to grow 6.4% in 2026, up from the 6.0% estimate in July. Strong public investment and steady export growth in India contributed to this upward revision. However, the 2027 forecast for South Asia has decreased to 6.5% from 6.7%, due to weaker projections for several economies facing trade, energy, and weather challenges.
Developing Southeast Asia also saw modest upgrades for both forecast years. Growth is now estimated at 4.7% in 2026, compared to 4.6% in July, and 4.9% in 2027. Manufacturing and services supported activity during the first half of 2026 across much of the subregion. The Asian Development Bank explained that performance varied among economies based on food and energy costs, tourism, public spending, and investment affecting domestic demand.
Pacific Region Faces a Diminished Growth Outlook
The Pacific experienced the largest downward revisions among the subregions covered. Growth is now forecast at 3.0% in 2026 and 2.9% in 2027, with each figure reduced by 0.3 percentage points. Concerns about agricultural output have increased due to El Niño conditions, while energy market disruptions continue to raise costs for island economies. Weak mining in Papua New Guinea and sluggish industrial activity in Fiji also contributed to the revised regional outlook.
Growth projections for Caucasus and Central and West Asia have been 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. The growth outlook for developing East Asia remained unchanged in the September update. Across developing Asia and the Pacific, forecasts indicate slower growth than in 2025, despite ongoing support from investment, public spending, and technology exports, as noted in the economic sector.