MANILA, PHILIPPINES / RankWire.AI / – The Asian Development Bank has increased its forecast for developing Asia and the Pacific’s economic growth to 5.0% in 2026, up from 4.9% previously. This revision from the July estimate reflects a positive outlook, with growth expected to rise slightly to 5.1% in 2027, as detailed 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, which bolster regional economic activity.
The inflation rate in the region is projected to decrease marginally to 4.2% in 2026 from 4.3% in July, according to the inflation forecast. For 2027, the inflation forecast has slightly risen to 3.5% from 3.4%. Despite these adjustments, 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 consumer impacts from high energy costs, although elevated global energy prices continue to exert pressure on household and business expenses across much of the region.
The outlook identifies conflict and extreme weather events as primary risks threatening the region’s economies. Persistent disruptions related to conflicts in the Middle East and Ukraine have kept global energy prices volatile and high. Additionally, a potential strong El Niño could reduce agricultural output and hydropower generation in affected economies. The report also highlights renewed trade policy uncertainties, tighter financial conditions, and a sharp revaluation of AI-related equities as further downside risks.
Forecasts for South and Southeast Asia Show Improvement
South Asia experienced one of the most significant upward revisions in its growth outlook during the September assessment. The subregion is now expected to expand by 6.4% in 2026, an increase from the 6.0% estimated in July. Strong public investment and sustained export growth in India contributed to this upward adjustment. However, the 2027 forecast for South Asia has been lowered to 6.5% from 6.7%, reflecting weaker projections for several economies facing trade, energy, and weather-related challenges.
Meanwhile, developing Southeast Asia has also received modest upgrades for both forecast years. Growth is now projected at 4.7% in 2026, up from 4.6% in July, and 4.9% in 2027. During the first half of 2026, manufacturing and services sectors supported activity across much of this subregion. The Asian Development Bank noted that economic performance varied among countries due to factors such as food and energy costs, tourism conditions, public spending, and investment, which influenced domestic demand.
Pacific Region Faces a More Pessimistic Growth Outlook
The Pacific subregion experienced the largest downward revisions among those covered by the report. Growth forecasts for 2026 are now set at 3.0%, down from previous estimates, with 2.9% projected for 2027—both cut by 0.3 percentage points. Concerns over agricultural output due to El Niño conditions and ongoing disruptions in energy markets continue to drive costs higher across island economies. Weak mining activity in Papua New Guinea and subdued industrial output in Fiji also contributed to this downward adjustment.
Growth estimates for Caucasus and Central and West Asia were reduced by 0.1 percentage point for both 2026 and 2027. The subregion is now forecast to grow at 3.7% in 2026 and 4.1% in 2027, partly due to weaker external demand. Conversely, the growth outlook for developing East Asia remained unchanged in the September update. Across developing Asia and the Pacific, the latest forecasts indicate a slowdown compared to 2025, but investment, public support, and technology exports continue to underpin economic activity.