The Asian Development Bank on 23 September trimmed its growth forecast for developing Asia and the Pacific to 5% for 2026, down from 5.5% in 2025, citing a strengthening El Nino and widening geopolitical conflicts that are pushing up food and energy prices. The Manila-based lender's Asian Development Outlook, released the same day, projects growth edging up to 5.1% in 2027, with the 2026 figure revised 0.1 percentage points higher than the bank's July estimate on the strength of investment, government stimulus and technology exports tied to the global artificial intelligence boom.
ADB President Masato Kanda said the region "has remained resilient, but the risks are growing." In a statement accompanying the report, Kanda pointed to drier conditions linked to El Nino reducing harvests and hydropower output, warning that this is "pushing food and energy prices higher, and hitting the most vulnerable the hardest." He added that a prolonged energy crisis and renewed risks in financial markets make it more important for governments to prepare, and said the bank is supporting those efforts.
The bank also trimmed its regional inflation forecast for 2026 to 4.2%, down from 4.3% in July, citing price-stabilization measures that partly offset persistently high energy costs. Its 2027 inflation projection was revised up slightly, to 3.5% from 3.4%. Both figures remain above the 3% rate recorded across the region in 2025.
Two risks dominate the outlook
The September outlook names two primary risks to its growth and inflation projections, according to the report. A broadening of the Middle East conflict and an intensifying war in Ukraine could keep global energy prices elevated and volatile, with spillover into other commodities. Separately, a very strong El Nino event, forecast to persist through the first quarter of 2027, is expected to raise energy demand while lowering agricultural output, pushing up both fuel and food prices. The bank flagged further downside risks, including a sharp correction in AI-related equity valuations, tightening financial conditions and renewed trade policy uncertainty.
Subregional forecasts diverge
Growth prospects vary widely by subregion, the bank said. Southeast Asia's outlook improved on stronger-than-expected performance in the first half of 2026, while South Asia's near-term figures rose on the back of Indian investment and exports.
- Southeast Asia: the 2026 forecast was raised to 4.7% from 4.6%, and 2027 to 4.9% from 4.8%.
- East Asia, including the People's Republic of China, saw its outlook left unchanged from July.
- South Asia's 2026 forecast rose to 6.4% from 6.0% on strong public investment and export growth in India, though the 2027 projection was cut by 0.2 percentage points to 6.5% on weaker outlooks for Afghanistan, Bangladesh, India and Nepal amid trade, energy and weather-related shocks.
- The Caucasus and Central and West Asia were revised down 0.1 percentage points for both years, to 3.7% for 2026 and 4.1% for 2027, mainly on weaker external demand in Turkiye.
- Pacific economies face the steepest cuts of any subregion — both years down 0.3 percentage points, to 3% for 2026 and 2.9% for 2027, on prolonged energy market disruption and anticipated El Nino effects on mining and agriculture.
Reuters reported separately on 23 September that Asia's crude oil imports climbed to a post-Iran-conflict-era high in September, even as overall demand growth remained comparatively weak — a trend that lines up with the energy-market risks the ADB outlook flagged.
The Asian Development Outlook is published quarterly by the Manila-based lender, which was founded in 1966 and is owned by 69 members, 50 of them from the Asia and Pacific region.