MANILA, PHILIPPINES / RankWire.AI / – Economic growth across developing Asia and the Pacific will moderate to 5.0% in 2026 from 5.5% in 2025. The Asian Development Bank raised its 2026 forecast by 0.1 percentage point from its July estimate. Growth should edge up to 5.1% in 2027, according to the September Asian Development Outlook. Strong investment, government stimulus and technology exports tied to artificial intelligence spending continue to support regional activity.
The regional inflation forecast for 2026 fell to 4.2%, compared with 4.3% in the July outlook. The 2027 inflation projection rose slightly to 3.5% from 3.4%. Both figures remain above the 3.0% inflation rate recorded across developing Asia and the Pacific in 2025. Price stabilization measures have limited some consumer impacts from high energy costs, while elevated global energy prices continue to pressure household and business expenses across much of the region.
The outlook identifies conflict and extreme weather among the main risks facing economies across the region. Continued disruptions linked to conflicts in the Middle East and Ukraine have kept global energy prices high and volatile. A very strong El Niño could also reduce agricultural production and hydropower generation in affected economies. The report also lists renewed trade policy uncertainty, tighter financial conditions and a sharp repricing of AI-related equities among additional downside risks.
South and Southeast Asia forecasts strengthen
South Asia received one of the largest growth upgrades in the September assessment. The subregion is forecast to expand 6.4% in 2026, up from the 6.0% estimate published in July. Strong public investment and firm export growth in India contributed to the higher projection. The 2027 forecast for South Asia fell to 6.5% from 6.7%, reflecting weaker projections for several economies facing trade, energy and weather pressures.
Developing Southeast Asia also received modest upgrades for both forecast years. Growth is now projected at 4.7% in 2026, compared with 4.6% in July, and 4.9% in 2027. Manufacturing and services supported activity during the first half of 2026 across much of the subregion. The Asian Development Bank said performance varied across economies as food and energy costs, tourism conditions, public spending and investment affected domestic demand.
Pacific economies face weaker outlook
The Pacific recorded the largest downward revisions among the subregions covered by the report. Growth is forecast at 3.0% in 2026 and 2.9% in 2027, with both projections cut by 0.3 percentage points. El Niño conditions have increased concerns about agricultural output, while energy market disruptions continue to raise costs across island economies. Mining weakness in Papua New Guinea and subdued industrial activity in Fiji also contributed to the revised regional assessment.
Caucasus and Central and West Asia growth was reduced by 0.1 percentage point for both forecast years. The subregion is projected to grow 3.7% in 2026 and 4.1% in 2027, partly reflecting weaker external demand. Developing East Asia’s growth outlook remained unchanged in the September update. Across developing Asia and the Pacific, the latest forecasts show slower growth than in 2025 while investment, public support and technology exports continue to underpin economic activity.