The 2025 growth forecast for economies in developing Asia and the Pacific (developing Asia) is raised by 0.3 percentage points from September, to 5.1%. The upgrade is due to stronger-than-expected growth in India, driven by robust domestic consumption, and solid export performance in the region’s high-income technology-exporting economies. The 2026 growth forecast is also revised up, by 0.1 percentage points, on reduced trade uncertainty following the conclusion of several trade agreements. However, regional growth is expected to slow to 4.6% next year, dented by higher US tariffs and weaker global economic activity. Inflation in developing Asia is expected to ease further to 1.6% in 2025, down from 1.7% projected in September, mainly reflecting lower-than-expected food inflation in India. The 2026 inflation forecast remains unchanged at 2.1%.
Renewed tariff tensions and trade policy uncertainty, and higher financial market volatility, remain key risks. Geopolitical pressures, along with weakness in the People’s Republic of China’s (PRC) property market, could also weigh on the region’s growth outlook.
For Policymakers
The Asian Development Outlook outlines policy challenges and provides recommendations.
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Developing Asia comprises the 46 members of the Asian Development Bank listed below by geographic group.
- Caucasus and Central Asia comprises Armenia, Azerbaijan, Georgia, Kazakhstan, the Kyrgyz Republic, Tajikistan, Turkmenistan, and Uzbekistan.
- East Asia comprises the People’s Republic of China; Hong Kong, China; the Republic of Korea; Mongolia; and Taipei,China.
- South Asia comprises Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan, and Sri Lanka.
- Southeast Asia comprises Brunei Darussalam, Cambodia, Indonesia, the Lao People’s Democratic Republic, Malaysia, Myanmar, the Philippines, Singapore, Thailand, Timor-Leste, and Viet Nam.
- The Pacific comprises the Cook Islands, Fiji, Kiribati, the Marshall Islands, the Federated States of Micronesia, Nauru, Niue, Palau, Papua New Guinea, Samoa, Solomon Islands, Tonga, Tuvalu, and Vanuatu.
Latest Findings
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Recent US Tariff Cuts Offer Some Relief for Developing Asia
The United States (US) has eased its tariff policy further since September. Following a sharp increase since February and a spike in April, US tariffs settled at historically high levels in August and September. Trade deals and further adjustments brought the US effective tariff down to 15% by mid-November, from 17% in September. Notably, the “Fentanyl-related” tariff on the People’s Republic of China (PRC) was cut from 20% to 10% on 10 November. This lowered the effective tariff applied on imports from the PRC from 49% to 39%, though it remains about 18 percentage points higher than at the end of 2024. The trade deal with the Republic of Korea, formalized on 13 November, cut the automobile tariff from 25% to 15%, aligning it with the tariff applied on automobile imports from the European Union and Japan. Finally, the US rolled back tariffs on 237 food products on 14 November. While these new exemptions have slashed effective tariffs for Papua New Guinea, Samoa, and Timor-Leste, the effect for developing Asia as a whole will be marginal as these products account for less than 2% of the region’s exports to the US. Even after these adjustments, US effective tariffs on developing Asia remain at 27%, well above the 15% on the rest of the world and still up by 17 percentage points compared to the end of 2024.
Recent bilateral deals involve significant concessions to the US. In October, Cambodia, Malaysia, Thailand, and Viet Nam all pledged to address non-tariff barriers and strengthen intellectual property standards, as well as labor and environmental standards. Thailand and Viet Nam committed to purchasing more US commodities, while Malaysia agreed to provide preferential market access for certain US agricultural goods. Cambodia and Thailand also agreed to eliminate digital services taxes on US firms, and Viet Nam is finalizing commitments on digital trade facilitation. The PRC suspended some retaliatory measures, notably export controls on rare earths and critical minerals, and it committed to purchase more US agricultural goods, including sorghum and soybeans, and ramp up efforts to curb fentanyl flows. While some of these measures are not finalized, they highlight a widening of concessions obtained by the US.
Outlook by Subregion
Caucasus and Central Asia
The growth forecast for Caucasus and Central Asia is revised upward to 5.8% for 2025 and 5.0% for 2026, from the September ADO projections of 5.5% and 4.9%, respectively. The upward revision is driven by stronger-than-expected activity in Kazakhstan. Across most of the subregion, growth surprised on the upside in the third quarter of 2025, underpinned by public investment, rising remittances, robust domestic demand, and stable macroeconomic conditions.
Caucasus and Central Asia subregional inflation projections are raised, from 7.7% to 8.0% for this year, and from 6.6% to 7.1% for 2026. The upward revision reflects mounting inflationary pressures in Kazakhstan and Kyrgyz Republic, driven by higher food and service prices, utility tariff hikes, and currency depreciation.
East Asia
The forecast for East Asia’s growth is revised upward to 4.6% from 4.4% for 2025 and to 4.1% from 3.9% for 2026. The PRC; Hong Kong, China; the Republic of Korea; and Taipei,China all recorded stronger-than-expected growth in Q3 2025, driven largely by robust external demand—particularly for electronics-related products.
Inflation forecasts for East Asia are maintained at 0.3% for 2025 and 0.6% for 2026. In the PRC, inflation forecasts remain unchanged and low due to weak demand. Consumer price inflation averaged –0.1% in the first 9 months of 2025 compared to 0.3% last year. Nonfood inflation rose to 0.2%, while food prices dropped 1.7%. Core inflation edged up to 0.6%, driven by services inflation. Despite a favorable base effect in Q4, weak demand, price competition, and low food prices are expected to continue exerting downward price pressures.
South Asia
Growth in South Asia is expected to remain robust, with the 2025 forecast revised upward to 6.5%, from 5.9%, and the 2026 forecast maintained at 6.0%. This is driven by upgrades to India’s outlook based on robust growth in domestic consumption. Sri Lanka’s forecast is revised upward for 2025 and 2026 based on robust credit expansion, buoyant consumption, and improved investor confidence following rating upgrades. In contrast, Bangladesh’s fiscal year (FY) 2026 (ending 30 June 2026) projection is lowered due to weaker exports amid subdued global demand and supply disruptions, while the forecast for FY2025 remains unchanged. Pakistan’s FY2025 growth outlook is upgraded following a stronger‑than-expected Q4. Growth forecasts for the remaining South Asian economies are retained, although Nepal faces lingering uncertainty in the aftermath of civil unrest in September and the ongoing political transition.
Inflation projections for South Asia are revised down to 3.3% in 2025, compared to 3.7% in the ADO September, and retained at 4.7% for 2026. The downward revision reflects lower inflation in India for FY2025, driven by favorable monsoon conditions, strong monsoon crop output, and GST rate cuts. Sri Lanka’s forecast is also revised lower as prolonged deflation through much of 2025 held back price recovery, with inflation turning positive only late in the year. For 2026, Sri Lanka’s inflation is expected to recover gradually. India’s forecast, meanwhile, remains unchanged as base effects reverse. Inflation forecasts for Bangladesh, Bhutan, Maldives, and Nepal remain unchanged.
Southeast Asia
Southeast Asia’s GDP growth forecasts for 2025 and 2026 have been raised to 4.5% and 4.4%, from 4.3% in both years. The revision reflects strong Q3 performance in Indonesia, Malaysia, Singapore, and Viet Nam, steady growth in Thailand, and lower growth prospects for the Philippines due to weak infrastructure spending amid investigations of publicly-funded projects, and natural hazards. The outlook in the subregion varies with the different influences of global and domestic factors on economies, with some benefiting from resurgent exports and sectoral growth and others facing constraints from high household debt, slowing investment, and infrastructure bottlenecks. Several risks to the subregion’s prospects remain, notably from global uncertainty, climate-related disruptions, and domestic political developments. Despite these risks, Southeast Asia remains resilient, with prospects depending on sustained policy support and flexible economic strategies.
Inflation projections for the subregion have been slightly revised, down to 2.4% for 2025 and upward to 2.8% for 2026. The slight downward revision in 2025 from 2.5% to 2.4% reflects stable energy and food prices, lower supply pressures, weaker domestic demand, and prompt government actions. Meanwhile, a pick-up in domestic demand in Indonesia is expected to lift average inflation in 2026. Most countries are expected to keep inflation within target, though risks remain from possible climate disruptions and currency volatility.
The Pacific
Growth projections for the Pacific are maintained at 4.1% in 2025 and 3.4% in 2026. The forecasts for Papua New Guinea and Fiji, the subregion’s two largest economies, are retained. Strong resource-related output, higher prices for key exports, and improved foreign exchange availability continue to drive the outlook for Papua New Guinea, while stable tourism supports growth prospects in Fiji. Tourism also remains a key growth driver elsewhere in the Pacific, along with public spending stimulus.
The inflation projection is reduced to 2.5% in 2025 but retained at 3.4% for 2026. Price trends in Fiji drive the downward adjustment, with measures in that country to reduce the cost of essential goods and services having a larger impact than anticipated.
Publication and Links
Asian Development Outlook (ADO) December 2025:Growth Steadies But Uncertainty Lingers
The Asian Development Outlook analyzes economic and development issues in developing Asia and the Pacific. This includes forecasting the inflation and gross domestic product growth rates of economies throughout the region, including the People’s Republic of China and India.