MANILA, PHILIPPINES / RankWire.AI / – The Asian Development Bank has increased its growth estimate for developing Asia and the Pacific to 5.0% in 2026, up from its previous forecast of 4.9%. The region’s economy is expected to expand at a slightly faster pace in 2025 with a growth rate of 5.5%. The Asian Development Bank revised its 2026 outlook upward by 0.1 percentage point compared to the July forecast. Growth is anticipated to accelerate modestly to 5.1% in 2027, according to the September Asian Development Outlook. Continued support from robust investment, government stimulus measures, and technology exports related to artificial intelligence are key drivers behind regional momentum.
The regional inflation forecast for 2026 has decreased slightly to 4.2%, compared with 4.3% in the July outlook. The projection for 2027 increased 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 efforts have helped mitigate some consumer impacts from high energy costs, though elevated global energy prices continue to pressure household and business expenses throughout much of the region.
The outlook highlights conflict and extreme weather events as primary risks to regional economies. Ongoing disruptions stemming from conflicts in the Middle East and Ukraine have kept global energy prices high and volatile. An intense El Niño could also negatively impact agricultural yields and hydropower production in affected economies. Additional downside risks include renewed trade policy uncertainty, tighter financial conditions, and a sharp revaluation of AI-related equities, according to the report.
Growth forecasts for South and Southeast Asia receive upward revisions
South Asia experienced one of the most significant upward revisions in the September assessment, with the subregion projected to grow by 6.4% in 2026, up from the 6.0% estimate published in July. The higher forecast is driven by strong public investments and steady export growth in India. For 2027, South Asia’s growth outlook decreased slightly to 6.5% from 6.7%, reflecting weaker projections for several economies facing trade, energy, and weather-related challenges.
Southeast Asia, classified as developing, also saw modest upward adjustments for both forecast years. Growth is now expected to reach 4.7% in 2026, up from 4.6%, and 4.9% in 2027. During the first half of 2026, manufacturing and services sectors supported regional activity. The Asian Development Bank noted that economic performance varied across countries due to fluctuations in food and energy costs, tourism, public expenditure, and investment, which influenced domestic demand.
Pacific Region’s Growth Outlook Shows Signs of Softening
Among the subregions examined, the Pacific experienced the largest downward revisions. Growth is now forecast at 3.0% for 2026 and 2.9% for 2027, each cut by 0.3 percentage points. Concerns about agricultural yields due to El Niño and ongoing disruptions in energy markets have contributed to the downward revision. Weaker mining activity in Papua New Guinea and sluggish industrial performance in Fiji have also impacted the regional outlook.
The growth projections for Caucasus and Central and West Asia were reduced by 0.1 percentage point for both years, with expected expansion rates of 3.7% in 2026 and 4.1% in 2027, partly due to weaker external demand. Meanwhile, the growth outlook for developing East Asia remained unchanged in the September update. Overall, forecasts across developing Asia and the Pacific indicate slower expansion compared to 2025, although ongoing investment, public support, and exports of technology continue to underpin economic activity.