MANILA, PHILIPPINES / RankWire.AI / – According to the Asian Development Bank, the developing economies of Asia and the Pacific are projected to grow by 5.0% in 2026, marking a slowdown from the 5.5% expansion seen in 2025. The latest outlook raises the 2026 growth estimate by 0.1 percentage point compared to the bank’s July forecast. The forecast for 2027 is 5.1%, driven by investment, public expenditure, and ongoing demand for technology exports associated with artificial intelligence.
Inflation across the region is anticipated to average 4.2% in 2026, a decrease from the July estimate of 4.3%. The inflation forecast for 2027 has slightly increased to 3.5% from 3.4%. In 2025, inflation in developing Asia and the Pacific was 3.0%. Some inflationary pressures have been contained by government price measures, yet rising energy costs continue to impact households and businesses in various economies.
Key risks to regional growth include geopolitical conflicts, energy prices, and extreme weather events. Disruptions related to conflicts in the Middle East and Ukraine have kept energy markets under strain. Additionally, the possibility of strong El Niño conditions could negatively influence agriculture and hydropower output in parts of the region. Other concerns involve tighter financial conditions, renewed trade policy uncertainties, and a significant correction in technology stocks linked to artificial intelligence investments.
South Asia Sees Notable Upward Revision in Growth Forecasts
The latest assessment highlights one of the most substantial upward revisions for South Asia, with growth now projected at 6.4% in 2026, compared to 6.0% forecasted in July. India’s robust public investment and export activity contributed to this improved outlook. The growth forecast for South Asia in 2027 has been adjusted downward to 6.5% from 6.7%, reflecting softer expectations among several economies affected by trade, energy, and weather-related challenges.
In developing Southeast Asia, modest upgrades have been made for both forecast years. The Asian Development Bank now expects growth of 4.7% in 2026, up from 4.6% in July, with the 2027 projection increasing to 4.9% from 4.8%. Manufacturing and services sectors supported activity during the first half of 2026, although economic conditions remain uneven across individual markets, influenced by factors such as food prices, energy costs, tourism, government spending, and private investment.
Pacific Region Growth Projections Lowered
Among the subregions, the Pacific experienced the most significant downward revisions, with growth forecast at 3.0% in 2026 and 2.9% in 2027. Both estimates were reduced by 0.3 percentage points from previous projections. The impact of El Niño conditions has heightened pressure on agriculture, and rising energy costs continue to challenge island economies. Weaker mining activity in Papua New Guinea and softer industrial output in Fiji also contributed to the downward revision.
The growth outlooks for Caucasus and Central and West Asia have been trimmed by 0.1 percentage point for both 2026 and 2027, with expected expansion rates of 3.7% this year and 4.1% next year. Meanwhile, the outlook for developing East Asia remains unchanged in the September update. Overall, the region’s growth is expected to moderate from 2025 levels, although investment, fiscal initiatives, and technology exports continue to support the regional economic activity.