MANILA, PHILIPPINES / RankWire.AI / – The Asian Development Bank has increased its projection for economic expansion across developing Asia and the Pacific to 5.0% in 2026, up from its previous estimate of 4.9%. This revision follows its July forecast, which anticipated a 4.9% growth rate. For 2027, growth is expected to accelerate slightly to 5.1%, as outlined in the September Asian Development Outlook. The region continues to benefit from robust investment, government stimulus measures, and technology exports driven by artificial intelligence investments, all of which bolster regional economic activity.
Inflation in the region is projected to decline slightly, with the inflation forecast for 2026 reduced to 4.2% from 4.3% in the July outlook. The 2027 inflation forecast has risen marginally 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 impacts of high energy costs, although elevated global energy prices continue to exert pressure on household and business expenses throughout much of the region.
The outlook highlights conflict and extreme weather as primary risks to regional economies. Ongoing disruptions linked to conflicts in the Middle East and Ukraine have kept global energy prices high and volatile. Additionally, a strong El Niño event could adversely affect agricultural output and hydropower generation in affected economies. The report also flags renewed uncertainties in trade policies, tighter financial conditions, and a sharp revaluation of AI-related equities as other downside risks.
Forecasts for South and Southeast Asia Show Improvement
South Asia experienced one of the most significant upward revisions in the September assessment. The subregion is now projected to grow by 6.4% in 2026, an increase from the 6.0% estimate issued in July. The boost is mainly attributed to strong public investment and consistent export growth in India. However, the 2027 forecast for South Asia has decreased slightly to 6.5% from 6.7%, reflecting weaker outlooks for several economies facing trade, energy, and weather challenges.
Modest upward revisions have also been made for both forecast years in developing Southeast Asia. Growth is now expected to reach 4.7% in 2026, up from 4.6%, and 4.9% in 2027. Manufacturing and services sectors supported economic activity during the first half of 2026 across much of this subregion. The Asian Development Bank noted that performance varied among economies, influenced by fluctuations in food and energy costs, tourism, public spending, and investment levels affecting domestic demand.
Pacific Region Faces a More Pessimistic Growth Outlook
Among the subregions analyzed, the Pacific experienced the most significant downward revisions. Growth is now projected at 3.0% in 2026 and 2.9% in 2027, with both estimates lowered by 0.3 percentage points. Concerns over agricultural output due to El Niño conditions, along with ongoing disruptions in energy markets increasing costs across island economies, have contributed to this outlook. Weak mining activity in Papua New Guinea and subdued industrial performance in Fiji further weighed on regional prospects.
Growth forecasts for Caucasus and Central and West Asia have been slightly reduced by 0.1 percentage point for both years, now expected to expand by 3.7% in 2026 and 4.1% in 2027, partly due to weaker external demand. Meanwhile, the growth outlook for developing East Asia remains unchanged in the September update. Overall, forecasts for developing Asia and the Pacific indicate slower growth than in 2025, although investment, public support, and technology exports continue to underpin economic activity across the region.