Regional GDP growth across developing Asia and the Pacific is projected to moderate to 5.1% in both 2026 and 2027

Inflation is also projected to increase from 3% in 2025, to 3.4% in 2026 and eventually 3.6% in 2027, according to the Asian Development Bank.

Economic growth in developing Asia and the Pacific is expected to slow to 5.1% in both 2026 and 2027, down from 5.4% last year, according to the latest forecasts by the Asian Development Bank (ADB).

This is due to the conflict in the Middle East and continuing trade uncertainty.

Regional inflation is also projected to rise to 3.6% in 2026 and 3.4% in 2027, from 3.0% in 2025. 

According to ADB's recent Asian Development Outlook (ADO) April 2026 report, most economies in developing Asia and the Pacific are expected to see their growth outlook worsen this year and in 2027, despite resilient private consumption and solid demand for artificial intelligence-related goods.

Further, economies in the Pacific are expected to experience the sharpest slowdown, from 4.2% growth in 2025 to 3.4% in 2026 and 3.2% in 2027.

Let's take a deeper dive into the economic growth for some of the markets across developing Asia and the Pacific: 
Report excerpts cited.

India

Economic growth in India accelerated in fiscal year 2025 on strong domestic demand. Real GDP grew by 7.6% in FY2025, higher than the 7.1% recorded in FY2024, supported by resilient household consumption and steady public investment. Private final consumption expenditure growth increased to 7.7% in FY2025 from 5.8% in FY2024, stimulated by lower income tax and goods and services tax (GST) and falling food prices.

Government consumption grew 6.6%, helped by slower fiscal consolidation. Investment expanded a robust 7.1% as private investment responded to easing financial conditions, including falling interest rates, complementing an increase in public capital expenditure. Exports grew by 6.5% despite the impact of higher US reciprocal tariffs on several Indian goods, while imports grew at 6.4%.

Inflation eased sharply through FY2025, driven by food price deflation. Consumer price inflation averaged 1.7% in the first 9 months of FY2025, much lower than 4.6% in FY2025. Inflation fell to near zero in October 2025 and then rose gradually to 1.3% by December 2025. Food prices began to fall from mid-2025 and were 1.8% lower year on year in December 2025. This was driven largely by the fall in volatile vegetable prices from a high base in FY2024 as weather conditions led to higher supply.

According to the findings, fuel inflation also remained muted, as global commodity price pressures declined. This mitigated the impact of the 4.5% depreciation in the Indian rupee against the US dollar on energy imports. Core inflation remained stable, averaging 4.3% in the first 9 months of FY2025. This was partly due to higher prices for precious metals such as gold, implying that underlying pressure on other goods and services was relatively subdued. Moreover, imports from the People’s Republic of China, where inflation is muted, helped keep domestic prices in check.

The labour market also improved, with unemployment declining and work participation continuing to rise. The overall unemployment rate fell to 4.8% in December 2025 from 5.1% in April 2025, with rural unemployment declining to 3.9% by late 2025, but the urban unemployment rate rising marginally.

The worker population ratio improved through FY2025, from 53.3% in June 2025 to 56.7% in December 2025, driven by improvements in rural areas while work participation in urban areas remained stable.

One noteworthy trend was the improvement in the female labour force participation rate, for aged 15 or above, to 35.3% in December 2025 from 34.2% in April 2025.

Economic growth is expected to remain strong at 6.9% in FY2026, before strengthening further to 7.3% in FY2027.

Indonesia

GDP growth in India edged up in 2025 on the back of resilient domestic demand. The economy expanded by 5.1% in 2025, up from 5.0% in 2024, with domestic demand remaining the main driver.

After averaging around 5% in the first three quarters of 2025, growth accelerated to 5.4% year on year in the fourth quarter — its strongest expansion since the post-pandemic rebound in the third quarter of 2022. The pickup reflected firmer household spending and strengthening investment activity.

Inflation remained within the official target range. Headline inflation averaged 1.9% year on year in 2025, down from 2.3% in 2024. The moderation reflected lower administered prices and softer volatile food inflation, which helped contain overall price pressures despite strong domestic demand.

Core inflation edged up from 2024, signaling resilient consumption, but remained consistent with well-anchored inflation expectations within the 2.5% ± 1% official target range.

Inflation picked up in early 2026. The rebound in administered inflation in early 2026 pushed headline inflation above the target range. However, it reflected base effects from the 50% electricity tariff discount introduced in early 2025.

According to the analysis, inflation moderated in March 2026, as these base effects began to unwind, bringing headline inflation back toward the target range. Core pressures, however, remained stable.

GDP growth is projected to rise to 5.2% in 2026 and 2027, as showcased in the table below. Unless the conflict in the Middle East becomes prolonged and worsens, early growth momentum may be sustained. Private consumption should remain resilient, underpinned by stable income growth and sustained policy support.

Per the report, investment will likely improve gradually as downstream development and private participation gain more traction. Progress in mineral processing, manufacturing, and related supply chains should continue to crowd in domestic and foreign investment, supporting formal job creation.

Structural reforms to strengthen the business climate together with supportive financing conditions will likely drive capital formation. Public infrastructure and strategic projects will remain important complements to private investment. Average inflation will likely rise to 2.5% in 2026 and 2027, remaining within target.

As further highlighted, the Indonesian labour market is structurally constrained in expanding formal job creation, posing a key challenge for sustaining productivity growth and achieving Indonesia’s long-term development goals. Informal employment has remained high over the past decade, suggesting that growth has not translated into sufficient formal job opportunities.

Sectors absorbing the largest share of workers remain dominated by informal employment, while highly formalised sectors account for a relatively small share of total employment This limits productivity gains and weakens structural change toward better job quality. Demand for formal employment is concentrated in a narrow set of high-productivity sectors that require higher levels of skill and education.

While agriculture continues to absorb a large employment share, it remains characterised by low productivity and high informality. Similar patterns are in wholesale and retail trade, transportation, and other services, where informal employment continues to dominate. In contrast, sectors with higher skill demand and productivity account for a smaller share of total employment. This suggests that labour reallocation has lagged, with workers shifting more into low-productivity services than into higher-productivity sectors. As a result, productivity growth and gains are limited.

Inflation is also projected to increase from 3% in 2025, to 3.4% in 2026 and eventually 3.6% in 2027, according to the Asian Development Bank.

Malaysia

GDP growth in Malaysia inched up to 5.2% in 2025, up from 5.1% in 2024, despite what was described as "a tumultuous external environment". Robust domestic demand sustained growth, helped by a broad-based expansion across sectors.

Private consumption rose by 5.2% from 5.1% in 2024, while government consumption jumped by 6.6% from 4.7%.

At the same time, household spending remained resilient, supported by a favourable labour market, government assistance, and moderate inflation. The unemployment rate declined further, from 3.0% to 2.9% in November 2025.

Additional policy measures, such as increasing the minimum wage from RM1,500 to RM1,700, raising civil servant salaries, and providing direct cash aid, also strengthened household spending.

Inflation eased to 1.4% in 2025, down from 1.8% in 2024, largely due to slower price increases in non-food commodities and services. Communication and electricity, gas, and other fuel costs fell notably.

Inflation also moderated across health, recreation, sports and culture; transport; and household furnishings and routine items. Food and beverage inflation remained at 2.0%.

Core inflation, however, edged up slightly to 2.0% from 1.8%. Inflation began 2026 at a higher level, posting 1.6% in January, driven by rising non-food commodity prices. Core inflation also increased to 2.3%.

Growth is projected to soften in 2026 before picking up modestly in 2027. The delayed effects of tax reforms and restrictive trade measures introduced in 2025 will likely weigh on the economy in the near term. By 2027, although external challenges may persist, planned initiatives under the 13^th Malaysia Plan should support growth.

In response to the rising demand for skilled workers, the labour market is targeting to increase its share of highly skilled workers to between 35% and 45% by 2030.

Philippines

GDP growth in the Philippines decelerated to 4.4% in 2025 (2024: 5.7%) largely due to a contraction in investment. Stricter oversight of public infrastructure projects and tighter budget controls led to a marked decline in public investment in the second half of the year. Weather disturbances, including typhoons and earthquakes, also restrained economic activity, as did external headwinds stemming from volatility in global economic policies. Investor and consumer sentiment weakened.

Inflation eased to 1.7% in 2025 from 3.2% in 2024 on lower food and transport costs. Food inflation slowed to 1% from 4.6% as rice prices declined by an average 12.3% during the year. Given the larger share of food in low-income household consumption, inflation for the bottom 30% income group slowed to 0.3% in 2025 from 4.2% in 2024.

Transport inflation turned negative, averaging –0.4% on softer global oil prices. Core inflation moderated to 2.4% from 3.0%, indicating relatively subdued underlying price pressures. To help stabilise rice prices, the government introduced a tiered, price-triggered rice import tariff system effective January 2026. Instead of a flat tariff, rice import duties will be adjusted depending on global rice prices, within a 15%–35% range.

The ADB forecasted that growth will remain subdued amid heightened risks from the ongoing Middle East conflict, noting the Philippines' heavy reliance on imported crude oil and refined oil products.

Other transmission channels include possible disruption in remittances from overseas Filipinos, tighter financial conditions, and weaker investor and consumer sentiment. Heightened downside risks are weighing on the growth outlook of 4.4% in 2026 and 5.5% in 2027.

Further, inflation remained a relatively low 2.2% in the first two months of 2026, but price pressures rose sharply in March following the Middle East conflict. Given the heavy dependence on imported oil, higher global prices have quickly passed through to domestic fuel costs.

Gasoline and diesel prices rose sharply in March, though the government coordinated with oil companies to stagger adjustments and soften the immediate impact on consumers.

Thailand

Economic growth in Thailand moderated in 2025 – which the ADB said was largely due to weaker domestic demand, while external factors were mixed. While merchandise exports drove growth, slower tourism dampened activity. For the full year, real GDP expanded by 2.4% year on year, down from 2.9% in 2024 amid a challenging external environment and persistent structural constraints.

Deflation in 2025 stemmed from the continued decline in energy prices, government measures to ease the cost of living, and weak domestic demand. Headline inflation averaged –0.1% for the year as global oil prices softened. Domestic energy prices also fell as the government capped electricity and fuel prices, amplifying the global impact.

The fall in energy prices significantly reduced headline inflation despite modest price increases in food and services. Weak domestic demand reinforced these downward price pressures.

Inflation is expected to ease slightly in 2027 as energy price pressures moderate, while gradual improvements in tourism and services provide some upward pressure on prices

Additionally, economic growth will likely slow further in 2026 before picking up in 2027, with real GDP forecasted to grow by 1.8% in 2026 and 2.0% in 2027. The 2026 slowdown reflects softer global trade conditions, dissipation of front-loaded export shipments in 2025, and the impact of higher energy prices and elevated logistics costs following the escalation of conflict in the Middle East, alongside subdued private consumption amid high household debt.

Per the report, this forecast is under an early stabilisation scenario and subject to a very high level of uncertainty. Growth, it added, is expected to improve in 2027 on increased tourism and private investment.

A key finding that was also highlighted was that Thailand’s labour productivity growth has lagged behind its regional peers over the past decade. Total factor productivity growth was 0% in 2015–2023, showing minimal effects from technological change, innovation, and improved efficiency.

The domestic value-added in exports is also relatively low given the high reliance on imported intermediate inputs and limited spillovers from foreign investment.

Vietnam

Despite mounting global challenges, Vietnam's economy remained strong in 2025. GDP grew by 8%, up from 7.1% in 2024, matching the record post-pandemic growth of 8.0% attained in 2022.

In 2025, inflation averaged 3.3%, down from 3.6% in 2024 and within the government’s target range. Food prices remained relatively stable, while transport prices declined by 2.1% year on year, largely reflecting lower gasoline prices. Core inflation increased by 3.2% year on year, slightly below headline inflation, suggesting that price pressures were driven mainly by noncore components rather than broad-based demand.

The Pacific

Economic growth in the Pacific is expected to slow over the next few years, mainly because hydrocarbon production is not projected to increase much. Overall growth in the subregion is forecast to ease from 4.2% in 2025 to 3.4% in 2026 and 3.2% in 2027, largely reflecting developments in Papua New Guinea, the Pacific’s largest economy, where growth is projected to moderate to 3.6% in 2026 and 3.4% in 2027.

However, inflation in the subregion is expected to pick up, driven mainly by higher energy costs. In Papua New Guinea, additional price pressures are likely from currency depreciation, volatility in betel nut prices, rising fuel costs, and the removal of goods and services tax exemptions on some essential items.

Commenting on the overall regional forecasts, Albert Park, Chief Economist, ADB, said that the prolonged conflict in the Middle East is the "single biggest risk to the region’s outlook", as it could lead to persistently high energy and food prices and tighter financial conditions.

"With renewed trade policy uncertainty posing additional risks, it is essential that governments implement sound macroeconomic policies to sustain growth and contain inflation, with targeted support measures to protect vulnerable households," he added. 

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Lead image and infographics / ADB