MANILA, PHILIPPINES / RankWire.AI / – According to the Asian Development Bank, the developing economies of Asia and the Pacific are expected to expand by 5.0% in 2026. The region’s growth rate for 2025 was 5.5%, and the new projection for 2026 is 0.1 percentage points higher than their July forecast. The outlook for 2027 anticipates growth reaching 5.1%, driven by increased investment, public expenditure, and ongoing demand for technology exports related to artificial intelligence.
Inflation across the region is projected to average 4.2% in 2026, slightly down from the July estimate of 4.3%. The inflation forecast for 2027 has been marginally raised to 3.5% from 3.4%. In 2025, inflation stood at 3.0%. While government measures to control prices have helped ease some inflationary pressures, high energy costs continue to impact households and businesses across several economies.
Key risks to the regional outlook include geopolitical tensions, fluctuations in energy prices, and extreme weather events. Ongoing conflicts in the Middle East and Ukraine have sustained pressure on energy markets. Additionally, strong El Niño conditions may negatively influence agriculture and hydropower output in certain areas. Other potential challenges involve tighter financial conditions, renewed uncertainty in trade policies, and a possible sharp decline in technology shares linked to artificial intelligence investments.
South Asia’s Forecast Upward Revision Highlights Growth Potential
South Asia experienced one of the most significant upward revisions in the latest forecast. Growth is now expected to be 6.4% in 2026, compared to the 6.0% initially projected in July. India’s robust public investment and export activity played a key role in boosting this outlook. However, the 2027 forecast for South Asia has been adjusted downward to 6.5% from 6.7%, reflecting softer expectations across several economies affected by trade, energy, and weather issues.
In the case of Southeast Asia, minor upgrades were made for both forecast years. The Asian Development Bank now predicts growth of 4.7% in 2026, up from 4.6% in July, and the 2027 forecast has increased to 4.9% from 4.8%. Manufacturing and services sectors supported economic activity during the first half of 2026, though conditions varied across individual markets due to factors like food prices, energy costs, tourism, government spending, and private investments.
Pacific Region Growth Projections Lowered
The Pacific subregion saw the most substantial downward adjustments in the outlook. Growth is now forecast at 3.0% for 2026 and 2.9% for 2027, each reduced by 0.3 percentage points from previous estimates. Factors such as El Niño conditions have increased stress on agriculture, while elevated energy prices continue to challenge island economies. Weakening mining activity in Papua New Guinea and sluggish industrial output in Fiji also contributed to the downward revisions.
Forecasts for Caucasus and Central and West Asia have been lowered by 0.1 percentage point for both 2026 and 2027, with expected growth of 3.7% this year and 4.1% next year. Meanwhile, the growth outlook for developing East Asia remained unchanged in the September update. Overall, the growth rate across developing Asia and the Pacific is expected to slow from 2025 levels, although investment, fiscal measures, and technology exports continue to support regional economic activity.