ADB raises 2026 developing Asia growth forecast to 5%

September 23, 2026 (MLN): Economic growth across developing Asia and the Pacific is expected to slow to 5% in 2026 from 5.5% in 2025 before improving marginally to 5.1% in 2027, according to the Asian Development Bank’s (ADB) latest Asian Development Outlook (ADO) September 2026.

The ADB raised its 2026 regional growth forecast by 0.1 percentage points from its July projection, reflecting stronger-than-expected economic activity in parts of the region.

The bank also lowered its inflation forecast for 2026 to 4.2% from 4.3% previously, as price stabilization measures are expected to partly offset continued pressure from elevated energy prices.

However, the inflation forecast for 2027 was increased slightly to 3.5% from 3.4%. Both projections remain above the 3% inflation recorded in 2025.

ADB President Masato Kanda said the region has remained resilient, but risks to the economic outlook are increasing.

He highlighted the potential impact of a strengthening El Niño, warning that drier conditions could reduce agricultural harvests and hydropower generation, potentially pushing food and energy prices higher and disproportionately affecting vulnerable populations.

According to the ADB, strong investment, government stimulus measures and robust technology exports linked to the global artificial intelligence (AI) investment cycle are supporting regional growth despite geopolitical tensions and rising food and energy costs.

The ADO September 2026 identified escalating conflicts as a key risk to the outlook, particularly a potential broadening of the Middle East conflict and intensification of the Russia-Ukraine war. Such developments could keep global energy prices elevated and volatile while creating spillovers across other commodity markets.

A second major risk is a severe El Niño, which is expected to continue through the first quarter of 2027. The weather pattern could increase energy demand while reducing agricultural output, resulting in higher fuel and food prices.

The ADB also flagged a sharp correction in AI-related equity valuations, tighter financial conditions and renewed uncertainty over trade policies as additional downside risks to regional growth.

Growth prospects across subregions remain mixed. Developing Southeast Asia’s growth forecasts were raised to 4.7% for 2026 and 4.9% for 2027, from earlier projections of 4.6% and 4.8%, respectively, following stronger-than-expected performance during the first half of 2026.

The outlook for developing East Asia, including the People’s Republic of China, remained unchanged.

For South Asia, the ADB upgraded its 2026 growth forecast to 6.4% from 6%, supported by strong public investment and firm export growth in India.

However, the 2027 forecast was lowered by 0.2 percentage points to 6.5%, reflecting weaker projections for Afghanistan, Bangladesh, India and Nepal amid trade, energy and weather-related challenges.

Growth forecasts for the Caucasus and Central and West Asia were reduced by 0.1 percentage points for both 2026 and 2027, to 3.7% and 4.1%, respectively, mainly due to weaker-than-expected external demand, particularly in Türkiye.

The Pacific economies face the largest downward revisions, with growth forecasts for both years cut by 0.3 percentage points to 3% in 2026 and 2.9% in 2027, amid prolonged disruptions in energy markets and the expected impact of El Niño on mining and agriculture.

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