MANILA, PHILIPPINES / RankWire.AI / – Economic expansion across emerging markets in Asia and the Pacific is projected to slow slightly to 5.0% in 2026 from 5.5% in 2025. The Asian Development Bank has increased its forecast for 2026 by 0.1 percentage points compared to its July projection. The outlook for 2027 indicates growth could rise modestly to 5.1%, according to the September Asian Development Outlook. Continued support from robust investment, government stimulus measures, and technology exports linked to artificial intelligence are key factors maintaining regional momentum.
Meanwhile, the inflation forecast for the region in 2026 has been revised downward to 4.2%, from 4.3% in the July outlook. The projection for 2027 has risen slightly 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. Efforts to stabilize prices have helped mitigate some consumer impacts from high energy costs, but persistent global energy prices continue to exert upward pressure on household and business expenses throughout much of the region.
The report highlights conflict and extreme weather events as principal risks confronting economies in the area. Ongoing disruptions related to conflicts in the Middle East and Ukraine have kept global energy prices elevated and volatile. Additionally, a potentially intense El Niño event could reduce agricultural output and hydropower capacity in affected countries. The analysis also notes other downside risks, including renewed uncertainty around trade policies, tighter financial conditions, and a sharp decline in AI-related equities prices.
Forecasts for South and Southeast Asia Show Signs of Strengthening
South Asia experienced one of the most significant upward revisions in its growth outlook during the September assessment. The subregion is now expected to grow by 6.4% in 2026, an increase from the 6.0% previously estimated in July. The growth boost is largely attributed to strong public investment and sustained export growth in India. However, the projection for 2027 has been slightly lowered to 6.5% from 6.7%, reflecting some economies’ struggles with trade, energy, and weather-related challenges.
Similarly, developing Southeast Asia received modest upward adjustments for both forecast years. The region’s growth is now forecasted at 4.7% in 2026, up from 4.6%, and 4.9% in 2027. During the first half of 2026, manufacturing and service sectors supported economic activity across many nations within the subregion. The Asian Development Bank noted that performance varied among economies, influenced by factors such as fluctuating food and energy costs, tourism dynamics, public expenditure, and investment levels affecting domestic demand.
Pacific Region Faces a More Pessimistic Growth Outlook
Among the subregions examined, the Pacific experienced the most significant downward revisions. Growth is now projected at 3.0% for 2026 and 2.9% for 2027, with both forecasts reduced by 0.3 percentage points. Concerns over El Niño conditions have heightened worries about agricultural yields, while ongoing disruptions in energy markets continue to drive up costs in island economies. Weakness in the mining sector in Papua New Guinea and subdued industrial activity in Fiji also contributed to the downward revision of the regional outlook.
Growth forecasts for Caucasus and Central and West Asia have been lowered by 0.1 percentage points for both years. The region is now expected to expand by 3.7% in 2026 and 4.1% in 2027, partly due to weaker external demand. In contrast, the growth outlook for developing East Asia remained unchanged in the September update. Overall, the latest projections indicate slower growth in 2026 compared to 2025 across developing Asia and the Pacific, although ongoing investment, government support, and technology exports continue to underpin economic activity.