MANILA, PHILIPPINES / RankWire.AI / – Developing Asia and the Pacific are expected to see a slowdown in economic growth to 5.0% in 2026 from 5.5% in 2025, with the Asian Development Bank raising its forecast by 0.1 percentage points from July. According to the September Asian Development Outlook, growth is forecasted to rise slightly to 5.1% in 2027, supported by ongoing investment, government stimulus measures, and technology exports related to artificial intelligence spending, which continue to bolster regional activity.
The inflation forecast for the region in 2026 has decreased to 4.2%, down from 4.3% in July, while the 2027 projection has edged up marginally to 3.5% from 3.4%. Nonetheless, both figures remain above the 3.0% inflation rate recorded across developing Asia and the Pacific in 2025. Measures aimed at stabilizing prices have mitigated some consumer impacts from high energy costs, although rising global energy prices continue to exert pressure on household and business expenses throughout much of the region.
The outlook highlights conflict and extreme weather events as primary risks threatening regional economies. Persistent disruptions from conflicts in the Middle East and Ukraine have kept global energy prices elevated and volatile. Additionally, a very strong El Niño could adversely affect agricultural output and hydropower generation in affected economies. The report also notes other downside risks, including renewed trade policy uncertainty, tighter financial conditions, and a sharp revaluation of AI-related equities.
Forecasts for South and Southeast Asia Improve
South Asia experienced one of the most significant growth upgrades in the September assessment, with the subregion expected to grow by 6.4% in 2026, up from the 6.0% estimate in July. Strong public investment and robust export growth in India contributed to this upward revision. However, the 2027 forecast for South Asia has decreased slightly to 6.5% from 6.7%, reflecting weaker outlooks for several economies facing trade, energy, and weather challenges.
Similarly, developing Southeast Asia received modest upward revisions for both forecast years, with growth now projected at 4.7% in 2026, compared to 4.6% in July, and 4.9% in 2027. Manufacturing and services supported economic activity during the first half of 2026 across much of the subregion. The Asian Development Bank noted that performance varied among economies as factors such as food and energy costs, tourism conditions, public spending, and investment influenced domestic demand.
Pacific Region’s Growth Outlook Dims
The Pacific saw the most significant downward revisions among the subregions, with growth projections lowered by 0.3 percentage points to 3.0% in 2026 and 2.9% in 2027. Concerns over agricultural output due to El Niño conditions, along with ongoing disruptions in energy markets raising costs across island economies, contributed to these adjustments. Weakness in mining in Papua New Guinea and sluggish industrial activity in Fiji also played a role in the revised regional outlook.
Growth estimates for Caucasus and Central and West Asia were each reduced by 0.1 percentage point for both years, with projections now at 3.7% in 2026 and 4.1% in 2027, partly due to declining external demand. Meanwhile, the growth outlook for developing East Asia remained unchanged in the September update. Overall, the latest forecasts for developing Asia and the Pacific indicate a slower pace of growth compared to 2025, although investment, public support, and technology exports continue to underpin economic activity.