ADB nudges Southeast Asia's 2026 growth forecast up to 4.7%

Facts

The Asian Development Bank (ADB) published the Asian Development Outlook September 2026 on 23 September 2026. It expects developing Asia and the Pacific to grow 5.0% in 2026 and 5.1% in 2027, after 5.5% in 2025 (source: ADB). For Southeast Asia, it raised the 2026 forecast to 4.7% (raised from 4.6% in the July outlook) and the 2027 forecast to 4.9% (raised from 4.8% in the July outlook) (source: ADB). ¹ Developing Asia's inflation forecast is 4.2% for 2026 (revised from 4.3%) and 3.5% for 2027 (revised from 3.4%) (source: ADB).

By country, ADB cut Cambodia's 2026 forecast to 3.9% (cut from 4.1% in the July outlook) and Brunei's to 1.2% (cut from 1.8% in the July outlook), and raised Timor-Leste's to 4.0% (raised from 3.8% in the July outlook) (source: ADB Southeast Asia chapter). ADB President Masato Kanda said a stronger El Niño would reduce harvests and hydropower and raise food and energy prices. The report says El Niño could persist into Q1 2027 and also lists escalating geopolitical rivalry, a correction in AI-related equities, tighter financial conditions and trade-policy uncertainty as downside risks (source: ADB).

Analysis

By country, the regional upgrade is small, while Cambodia and Brunei were cut. The upgrade is likely driven by economies benefiting from AI and tech demand, diverging from conditions for households in lower-income countries dependent on agriculture and migrant remittances. El Niño's impact is likely to be greatest in microfinance, where many borrowers depend on farm income.

Implications

Counterpoints and uncertainties

The revision is small and within forecast error. El Niño's strength and duration are uncertain and its impact may prove minor. A Southeast Asia-only inflation forecast could not be confirmed and is not included.