MANILA, PHILIPPINES / RankWire.AI / – The Asian Development Bank has raised its forecast for economic expansion across developing Asia and the Pacific to 5.0% in 2026 from 5.5% in 2025. The forecast for 2026 was increased by 0.1 percentage point from the July estimate. According to the September Asian Development Outlook, growth is expected to rise slightly to 5.1% in 2027. Continued support comes from robust investment, government stimulus measures, and technology exports driven by artificial intelligence spending.
The regional inflation estimate for 2026 has decreased to 4.2%, down from 4.3% projected in July. The inflation forecast for 2027 has increased 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 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 outlook highlights conflict and extreme weather as primary risks facing regional economies. Persistent disruptions from conflicts in the Middle East and Ukraine have kept global energy prices high and volatile. An intense El Niño event could also lead to decreased agricultural yields and lower hydropower generation in affected economies. Additional downside risks include renewed uncertainties in trade policies, tighter financial conditions, and a sharp revaluation of AI-related equities, as noted in the report.
Forecasts for South and Southeast Asia Show Improvement
South Asia experienced one of the most significant growth upgrades in the September assessment. The subregion is now expected to grow by 6.4% in 2026, an increase from the 6.0% forecast made in July. The upward revision was supported by strong public investments and solid export growth in India. The projection for 2027 has been adjusted downward slightly to 6.5% from 6.7%, reflecting weaker outlooks for several economies affected by trade, energy, and weather-related challenges.
Meanwhile, developing Southeast Asia has received modest upward revisions for both forecast years. Growth is now projected at 4.7% in 2026, up from 4.6% in July, and at 4.9% in 2027. Manufacturing and services sectors played a key role in supporting activity during the first half of 2026 across much of the subregion. The Asian Development Bank noted that performance varied among economies due to factors such as food and energy costs, tourism conditions, public spending, and investment affecting domestic demand.
Pacific Region Faces Diminished Growth Expectations
Among the subregions covered by the report, the Pacific experienced the largest downward revisions. Growth is forecast at 3.0% in 2026 and 2.9% in 2027, with both projections lowered by 0.3 percentage points. Concerns about agricultural output due to El Niño, along with ongoing disruptions in energy markets increasing costs across island economies, have contributed to the downward adjustments. Weak mining activity in Papua New Guinea and subdued industrial performance in Fiji also influenced the revised regional outlook.
Growth estimates for Caucasus and Central and West Asia were lowered by 0.1 percentage point for both 2026 and 2027. The subregion’s expected growth rates are 3.7% in 2026 and 4.1% in 2027, partly due to weaker external demand. The growth outlook for developing East Asia remained unchanged in the September update. Overall, forecasts for developing Asia and the Pacific project slower growth than in 2025, although ongoing investment, public support, and technology exports continue to underpin economic activity.