MANILA, PHILIPPINES / RankWire.AI / – The Asian Development Bank has increased its growth forecast for developing Asia and the Pacific, projecting a 5.0% expansion in 2026, up from 5.5% in 2025. This upward revision, announced in the September Asian Development Outlook, reflects a 0.1 percentage point increase from the July estimate. The region’s growth is expected to accelerate slightly to 5.1% in 2027. Ongoing support comes from robust investment, government stimulus measures, and technology exports linked to artificial intelligence investments.
In the meantime, the regional inflation forecast for 2026 has decreased marginally to 4.2%, compared to 4.3% in July. The inflation projection for 2027 has risen modestly 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 aimed at stabilizing prices have helped mitigate some consumer impacts from high energy costs, although elevated global energy prices continue to exert pressure on household and business expenses across much of the region.
The outlook highlights conflict and extreme weather as primary risks facing regional economies. Ongoing disruptions from conflicts in the Middle East and Ukraine have kept global energy prices high and volatile. Additionally, a very strong El Niño could potentially reduce agricultural output and hydropower generation in affected economies. The report also identifies renewed trade policy uncertainties, tighter financial conditions, and a sharp revaluation of AI-related stocks as further downside risks.
Economic forecasts for South and Southeast Asia see improvements
South Asia experienced one of the most significant growth upgrades in the September assessment. The subregion is now expected to grow by 6.4% in 2026, up from the 6.0% estimate reported in July. The upward revision is largely driven by strong public investments and steady export growth in India. Meanwhile, the 2027 growth forecast for South Asia has been lowered slightly to 6.5% from 6.7%, reflecting weaker outlooks for several economies facing challenges related to trade, energy, and weather conditions.
Similarly, Southeast Asia’s growth outlook has been modestly improved for both forecast years. The region is projected to expand by 4.7% in 2026 (up from 4.6% in July) and 4.9% in 2027. Manufacturing and services sectors contributed to activity during the first half of 2026 across much of the subregion. The Asian Development Bank noted that performance varied among economies, influenced by factors such as food and energy costs, tourism conditions, public spending, and investment levels affecting domestic demand.
Pacific economies face a more subdued growth outlook
Among the subregions covered, the Pacific experienced the largest downward revisions. Growth is forecast at 3.0% in 2026 and 2.9% in 2027, with each projection reduced by 0.3 percentage points. Concerns over agricultural output due to El Niño, along with ongoing disruptions in energy markets raising costs, have contributed to the downward adjustment. Weak mining activity in Papua New Guinea and subdued industrial performance in Fiji also played roles in the revised regional outlook.
Growth estimates for Caucasus and Central and West Asia have been lowered by 0.1 percentage point for both years. The region is now projected to grow 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 unchanged in the September update. Across developing Asia and the Pacific, the latest forecasts indicate a slowdown compared to 2025, although investment, public support, and technology exports continue to underpin economic activity.