MANILA, PHILIPPINES / RankWire.AI / – According to the Asian Development Bank, economic expansion in developing Asia and the Pacific is projected to slow to 5.0% in 2026. The region experienced a 5.5% growth rate in 2025, and the new forecast for 2026 is 0.1 percentage points higher than the bank’s July prediction. Growth is anticipated to reach 5.1% in 2027, driven by investments, increased public expenditure, and ongoing demand for technology exports related to artificial intelligence.
Inflation across the region is expected to average 4.2% in 2026, a slight decrease from the 4.3% forecast issued in July. The inflation estimate for 2027 has been marginally revised upward to 3.5% from 3.4%. In 2025, inflation in developing Asia and the Pacific stood at 3.0%. While government measures to control prices have helped mitigate some inflationary pressures, high energy costs continue to impact households and businesses in several economies.
The outlook highlights geopolitical conflicts, fluctuations in energy prices, and extreme weather events as primary risks to regional economic activity. Ongoing conflicts in the Middle East and Ukraine have maintained upward pressure on energy markets. Additionally, strong El Niño conditions could influence agricultural productivity and hydropower output in parts of the region. Other potential risks include tighter financial conditions, renewed uncertainties around trade policies, and significant adjustments in artificial intelligence-related technology shares.
South Asia Sees Largest Upward Revision in Growth Forecasts
South Asia experienced one of the most substantial upward adjustments in the latest forecast. The region’s growth is now projected at 6.4% in 2026, compared to the previous estimate of 6.0% in July. Strong public sector investments and India’s robust export activity contributed to the improved outlook. However, the 2027 forecast for South Asia was slightly lowered to 6.5% from 6.7%, reflecting softer expectations across several economies affected by trade, energy, and weather-related pressures.
Developing Southeast Asia also saw modest upward revisions for both forecast years. The Asian Development Bank now predicts growth of 4.7% in 2026, up from 4.6% in July, with the 2027 estimate increasing to 4.9% from 4.8%. Manufacturing and services sectors supported economic activity during the first half of 2026. Nonetheless, uneven economic conditions persist, influenced by factors such as food and energy prices, tourism, government spending, and private investment across various Southeast Asian nations.
Pacific Region Growth Projections Lowered
Among the subregions analyzed, the Pacific experienced the most significant downward revisions. Growth is now forecast at 3.0% in 2026 and 2.9% in 2027, both reduced by 0.3 percentage points from previous estimates. The impact of El Niño has intensified pressures on agriculture, while rising energy costs pose ongoing challenges for island economies. Weaker mining activity in Papua New Guinea and softer industrial output in Fiji also contributed to the downward adjustments.
Forecasts for Caucasus and Central and West Asia were also lowered by 0.1 percentage point for both 2026 and 2027. This subregion is expected to grow by 3.7% this year and 4.1% in 2027. Meanwhile, the growth outlook for developing East Asia remained unchanged in the September update. Overall, regional growth across developing Asia and the Pacific is expected to slow from 2025 levels, although ongoing investment, fiscal measures, and technology exports continue to support regional economic activity.