Economic growth across developing Asia and the Pacific will slow from 5.5% in 2025 to 5% this year before edging up to 5.1% in 2027, the Asian Development Bank (ADB) said in its latest outlook — with a strengthening El Niño singled out as a direct threat to harvests and hydropower generation.
The Asian Development Outlook (ADO) September 2026 was released in Manila on 23 September and reported by EconomyNext on Sunday night. The 2026 figure is 0.1 percentage points above the bank’s July projection — a modest upgrade, not a downgrade, despite the slowdown from last year.
”The risks are growing”
“The region has remained resilient, but the risks are growing,” ADB President Masato Kanda said. “A strengthening El Niño with drier conditions means smaller harvests and reduced hydropower, pushing food and energy prices higher, and hitting the most vulnerable the hardest.”
Kanda said the combination of a prolonged energy crisis and renewed financial-market risk made it “even more important for governments to prepare and protect the people most exposed.”
ADB credited strong investment, government stimulus and robust technology exports — driven by the global artificial-intelligence investment cycle — with holding growth up against geopolitical tension and rising energy and food costs.
Inflation trimmed for this year, raised for next
The bank cut its regional inflation forecast for 2026 to 4.2% from 4.3% in July, saying price-stabilisation measures had partly offset persistently high energy prices. The 2027 forecast was nudged up to 3.5% from 3.4%. Both remain above the 3% recorded in 2025.
Two risks dominate the outlook. The first is escalating conflict — specifically a broadening of the Middle East conflict and an intensification of Russia’s war in Ukraine — which could keep global energy prices elevated and volatile and spill into other commodities. The second is a very strong El Niño, forecast to persist through the first quarter of 2027, raising energy demand while cutting agricultural output.
A sharp correction in AI-related equity valuations, tightening financial conditions and renewed trade-policy uncertainty were listed as further downside risks.
Subregions diverge
| Subregion | 2026 | 2027 | Change vs July |
|---|---|---|---|
| Developing Southeast Asia | 4.7% | 4.9% | Up 0.1pp both years |
| South Asia | 6.4% | 6.5% | Up 0.4pp (2026), down 0.2pp (2027) |
| Developing East Asia (incl. PRC) | — | — | Unchanged |
| Caucasus, Central and West Asia | 3.7% | 4.1% | Down 0.1pp both years |
| The Pacific | 3.0% | 2.9% | Down 0.3pp both years |
South Asia’s upgrade for this year was driven by strong public investment and firm export growth in India. The 2027 cut reflects weaker forecasts for Afghanistan, Bangladesh, India and Nepal amid trade, energy and weather-related shocks. The Caucasus and Central and West Asia revision was attributed mainly to softer external demand, particularly in Türkiye. Pacific economies took the largest downgrade, on prolonged energy-market disruption and the expected effect of El Niño on mining and agriculture.
No separate Sri Lanka figure in this edition
Neither ADB’s release material nor EconomyNext’s report carries a country-level projection for Sri Lanka; the September edition publishes subregional aggregates. ADB’s most recent published forecast for the country dates to the July edition, when it retained Sri Lanka’s 2026 growth outlook at 4% and revised the inflation forecast up to 6%.
The mechanism Kanda named, however, bears directly on Sri Lanka: reduced hydropower output and smaller harvests are the two channels through which a dry El Niño phase has historically pushed up the country’s electricity costs and food prices.
