Asian Development Bank raises 2026 developing Asia growth outlook as risks to inflation intensify

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ADB raises Asia growth outlook

Highlights

Asian Development Bank raises developing Asia's 2026 growth forecast by 0.1 percentage points, now projecting 5% in 2026 and 5.1% in 2027.
ADB trims its 2026 inflation outlook to 4.2% but lifts 2027 to 3.5%, citing price stabilization efforts amid high energy costs and El Niño risks.
Developing Southeast Asia and South Asia receive growth upgrades for 2026, while the Pacific subregion faces steep downgrades due to energy disruptions and El Niño impact.

Updated outlook for regional growth and prices

As reported by Asian Development Bank in its Asian Development Outlook September 2026, the region's 2026 growth forecast is raised by 0.1 percentage points from its July view, while keeping a moderation path from 5.5% in 2025 to 5% this year and 5.1% in 2027.

ADB says strong investment, government stimulus, and solid technology exports linked to the global artificial intelligence investment cycle are helping sustain momentum even as geopolitical tensions and a strengthening El Niño add pressure to energy and food prices.

The lender trims its 2026 inflation forecast to 4.2% from 4.3% in July, saying price stabilization measures partly offset persistently high energy costs. Its 2027 inflation forecast is revised slightly higher to 3.5% from 3.4%, with both projections still above the 3% recorded in 2025.

ADB President Masato Kanda says the region remains resilient but faces growing risks, warning that drier conditions tied to a strengthening El Niño could reduce harvests and hydropower output while pushing up food and energy prices for vulnerable households.

Subregional divergence and downside risks

ADB identifies escalating conflict and a very strong El Niño as the two main threats to the region's growth and inflation outlook. It says a wider Middle East conflict and a stronger intensification of Russia's war in Ukraine could keep global energy prices elevated and volatile, while El Niño is forecast to persist through the first quarter of 2027 and weigh on agriculture, mining, and energy demand.

The bank also flags the risk of a sharp correction in artificial intelligence-related equity valuations, tighter financial conditions, and renewed trade policy uncertainty as additional downside factors for the region.

At the subregional level, developing Southeast Asia sees modest upgrades for 2026 and 2027 to 4.7% and 4.9% after stronger-than-expected first-half performance in 2026, while the outlook for developing East Asia, including the People's Republic of China, is unchanged.

South Asia's 2026 growth forecast is lifted to 6.4% from 6% on strong public investment and firm export growth in India, but its 2027 projection is cut to 6.5% from 6.7%. Forecasts for the Caucasus and Central and West Asia are reduced to 3.7% in 2026 and 4.1% in 2027, while the Pacific records the steepest downgrades, with growth now seen at 3% and 2.9% because of prolonged energy market disruption and expected El Niño effects on mining and agriculture.

In our earlier article on HR Ratings’ updated Mexico outlook for late 2026, we covered a modest upgrade to GDP growth alongside unchanged projections for end-2026 inflation and Banxico’s policy rate. The report also pointed to a stronger-than-expected peso and described how resilient domestic demand could support activity even as inflation risks remain tilted to the upside.

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