Developing economies across Asia and the Pacific are expected to maintain relatively strong economic momentum despite an increasingly uncertain international environment. The Asian Development Bank projects growth of around 5% in 2026 for developing Asia and the Pacific.

The latest assessment indicates that the region continues to benefit from domestic consumption, investment activity and expanding regional economic connections. At the same time, weaker external demand and global uncertainty could create challenges for several economies.

South Asia Remains a Major Growth Region

South Asia is expected to remain one of the faster-growing parts of the developing world. The Asian Development Bank’s latest projections put regional growth at approximately 6.4% in 2026.

Strong domestic markets are an important factor behind this performance. Rising consumer demand, infrastructure investment and expanding services industries continue to support economic activity in several South Asian economies.

However, the outlook differs from country to country, reflecting differences in inflation, fiscal conditions, investment and exposure to international markets.

Domestic Demand Provides Support

One of the region’s major strengths is the size of its domestic consumer markets.

When external demand becomes weaker, strong domestic consumption can provide an alternative source of economic activity. Household spending on services, retail goods, housing and other sectors can help businesses maintain revenues.

Public and private investment also contributes to demand by supporting construction, infrastructure and productive capacity.

Technology Is Reshaping Regional Economies

Digital technologies are becoming increasingly important across developing Asia.

Businesses are adopting online platforms, digital payments, cloud services and artificial intelligence to improve efficiency and reach customers. Governments are also expanding digital public infrastructure and online services.

Technology investment could support productivity growth, particularly if smaller businesses gain access to affordable digital tools and skilled workers.

Trade Remains Important

Despite stronger domestic demand, many Asian economies remain deeply connected to international trade.

Manufacturing supply chains across the region link producers to markets around the world. Changes in global demand, tariffs, shipping costs and geopolitical conditions can therefore have significant consequences for Asian exporters.

Diversification of supply chains could create new opportunities for countries capable of offering competitive production and reliable infrastructure.

Inflation Remains a Key Consideration

Price stability will continue to influence economic conditions.

Higher food, fuel or transportation costs can reduce household purchasing power and increase business expenses. Central banks therefore need to balance inflation control with the need to support economic activity.

Countries with stronger macroeconomic buffers may have greater flexibility when responding to external shocks.

Climate Risks Could Affect Growth

Climate-related events remain another significant risk for developing Asia.

Floods, droughts, storms and extreme heat can damage infrastructure and agriculture while disrupting supply chains. These effects can reduce productivity and increase public spending requirements.

Investment in climate-resilient infrastructure could therefore become increasingly important for protecting long-term economic growth.

Regional Cooperation Can Strengthen Resilience

Greater economic cooperation among Asian countries could help reduce exposure to external shocks.

Improved transport links, digital connectivity and cross-border trade arrangements can strengthen regional supply chains and create new opportunities for businesses.

Closer cooperation can also help countries respond collectively to climate risks and other shared challenges.

Growth Outlook Remains Positive

The ADB’s projection of approximately 5% growth for developing Asia and the Pacific in 2026 indicates that the region continues to demonstrate considerable economic resilience.

South Asia’s stronger projected expansion of around 6.4% further highlights the importance of the region to the wider Asian growth story.

Nevertheless, global trade uncertainty, inflation, financial-market volatility and climate-related disruptions could influence the trajectory during the coming period.

For developing Asia, the key challenge will be converting strong growth into broader improvements in productivity, employment, infrastructure and living standards.