MANILA, PHILIPPINES / RankWire.AI / – Economic expansion across developing Asia and the Pacific is projected to reach 5.0% in 2026, an upward revision from the previous forecast of 4.9%. This adjustment follows the Asian Development Bank increasing its 2026 outlook by 0.1 percentage points from its July estimate. Growth is expected to accelerate slightly to 5.1% in 2027, according to the September Asian Development Outlook. The region continues to benefit from strong investment, government stimulus measures, and technology exports driven by artificial intelligence investments, which bolster regional economic activity.
The inflation forecast for 2026 has been lowered to 4.2% from 4.3% in July, while the 2027 projection has marginally increased 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 to stabilize prices have helped mitigate some consumer impacts from high energy costs, yet rising global energy prices continue to exert pressure on household and business expenses throughout much of the region.
The report highlights conflict and extreme weather events as primary risks to regional economies. Ongoing disruptions related to conflicts in the Middle East and Ukraine have kept global energy prices volatile and elevated. Additionally, a potential strong El Niño could reduce agricultural yields and hydropower output in affected economies. The outlook also notes increased downside risks, including renewed trade policy uncertainties, tighter financial conditions, and a sharp revaluation of AI-related equities.
Forecasts for South and Southeast Asia Show Improvement
South Asia experienced one of the most significant upward revisions in the September outlook. The subregion is now expected to grow 6.4% in 2026, an increase from the 6.0% estimate published in July. Strong public investment and sustained export growth in India contributed to this positive revision. However, the 2027 growth forecast for South Asia has decreased slightly to 6.5% from 6.7%, reflecting softer projections for several economies facing trade, energy, and climate-related pressures.
Meanwhile, developing Southeast Asia received modest upward adjustments 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 the subregion. The Asian Development Bank noted that performance varied among economies, influenced by fluctuations in food and energy costs, tourism conditions, public spending, and investment levels affecting domestic demand.
Pacific Region Faces a More Pessimistic Outlook
Among the subregions analyzed, the Pacific experienced the most significant downward revisions. Growth is now forecast at 3.0% in 2026 and 2.9% in 2027, with both estimates reduced by 0.3 percentage points. Concerns over agricultural output due to El Niño conditions and ongoing energy market disruptions that raise costs across island nations have contributed to the downward adjustment. Weaker mining activity in Papua New Guinea and subdued industrial performance in Fiji further impacted the regional outlook.
Growth projections for Caucasus and Central and West Asia have been lowered by 0.1 percentage points for both years, with forecasts of 3.7% in 2026 and 4.1% in 2027, partly due to diminished external demand. The growth outlook for developing East Asia remained unchanged in the September update. Overall, the latest forecasts for developing Asia and the Pacific indicate slower growth compared to 2025, despite ongoing support from investment, public initiatives, and technology exports, as detailed in the economic sector.