ADB nudges up 2026 growth forecast for developing Asia, trims inflation view

The Asian Development Bank has marginally raised its growth projection for developing Asia and the Pacific for 2026 to 5.0%, up from 4.9% in its previous assessment, while lowering its inflation forecast for the year.

The Manila-based lender attributed the upgrade to resilient investment, government stimulus measures and export demand linked to artificial intelligence, which it said were helping offset pressure from energy prices and geopolitical tensions. Its growth forecast for 2027 was left unchanged at 5.1%.

On prices, the ADB trimmed its 2026 inflation estimate to 4.2% from 4.3% projected in July. It raised the 2027 inflation forecast to 3.5% from 3.4%, citing expectations of a stronger El Niño impact. Softer demand in China and government measures to shield consumers from rising fuel costs in South Asia are expected to keep inflation contained this year.

The lender said stronger prospects in Southeast and South Asia, along with fiscal support and AI-related export demand, underpinned the regional upgrade. However, growth forecasts were lowered for the Caucasus and Central and West Asia region and for the Pacific.

Risks to the outlook remain tilted to the downside. The ADB warned that persistently high energy prices and an intensifying El Niño could weigh on growth and add to inflationary pressures. It noted that elevated and volatile energy prices, driven by the prolonged Middle East conflict and the renewed escalation of Russia's war in Ukraine, continued to cloud the outlook.

On monetary policy, the ADB observed that regional central banks have largely held policy rates steady this year, balancing inflation risks against the need to support growth. It said future policy paths are expected to diverge depending on domestic conditions.

Developing Asia and the Pacific comprises 43 ADB members across five sub-regions.