MANILA, PHILIPPINES / RankWire.AI / – The forecast for economic expansion in developing Asia and the Pacific has been increased to 5.0% for 2026, down slightly from 5.5% in 2025. The Asian Development Bank revised its 2026 projection upward by 0.1 percentage points compared to its July estimate. Looking ahead to 2027, growth is expected to rise modestly to 5.1%, according to the September Asian Development Outlook. Continued support for regional activity is driven by robust investment, government stimulus measures, and exports of technology products related to artificial intelligence.
For 2026, the regional inflation forecast decreased slightly to 4.2%, from 4.3% in the July outlook. The inflation estimate for 2027 edged up 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 to stabilize prices have mitigated some consumer impacts from rising energy costs, but high 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 confronting regional economies. Ongoing disruptions related to conflicts in the Middle East and Ukraine have kept global energy prices high and volatile. Additionally, a very strong El Niño could reduce agricultural output and hydropower generation in affected economies. The report also identifies renewed uncertainty in trade policies, tighter financial conditions, and a sharp revaluation of AI-related equities as further downside risks.
South and Southeast Asia projections improve
South Asia experienced one of the most significant growth forecast upgrades in the September review. The subregion is now expected to grow by 6.4% in 2026, up from the 6.0% estimate published in July. The upward revision was driven by strong public investment and solid export growth in India. However, the 2027 forecast for South Asia has been lowered slightly to 6.5% from 6.7%, reflecting weaker projections for several economies facing trade, energy, and weather-related challenges.
Southeast Asia, also seeing modest forecast improvements for both years, is projected to expand by 4.7% in 2026, compared with 4.6% in July, and by 4.9% in 2027. Manufacturing and service sectors supported activity during the first half of 2026 across much of this subregion. The Asian Development Bank noted that economic performance varied across nations, influenced by fluctuations in food and energy costs, tourism, public expenditure, and investment levels affecting domestic demand.
Outlook for Pacific economies declines
Among the subregions analyzed, the Pacific experienced the largest downward revisions. Growth projections for 2026 and 2027 have been lowered by 0.3 percentage points each, to 3.0% and 2.9% respectively. Concerns about agricultural output have risen due to El Niño conditions, while disruptions in energy markets continue to drive up costs for island economies. Weakness in the mining sector in Papua New Guinea and subdued industrial activity in Fiji also contributed to the revised regional outlook.
Growth estimates for Caucasus and Central and West Asia were reduced by 0.1 percentage points for both years, with forecasts now at 3.7% for 2026 and 4.1% for 2027, partly due to decreased external demand. Meanwhile, the growth outlook for developing East Asia remained unchanged in the September update. Across the broader region of developing Asia and the Pacific, the latest forecasts indicate a slowdown compared to 2025, despite ongoing support from investment, public initiatives, and technology exports, as detailed in economic activity.