The Asian Development Bank (ADB) has signaled a cautious outlook for developing Asia, forecasting a slower pace of interest rate cuts amid heightened global trade risks, weakening domestic demand, and mounting geopolitical pressures. The assessment, outlined in the Asian Development Outlook (ADO) released in July 2025, presents a more measured path to monetary easing, in contrast to earlier expectations of accelerated support for regional economies.
According to the latest ADO, growth projections for developing Asia have been trimmed to 4.7% for 2025 and 4.6% for 2026, marking a downward revision from previous estimates. The revision comes in response to growing global economic uncertainty, particularly stemming from increased U.S. tariffs, continued disruptions in global trade flows, and persistent underperformance in domestic demand across several economies.
ADB cautions that the regional outlook could face further deterioration if trade tensions continue to escalate, especially between major economies. The report highlights that intensifying geopolitical conflicts could disrupt global supply chains, destabilize energy markets, and lead to broader economic repercussions for export-dependent nations across Asia.
While regional growth remains positive, the disparity in performance across subregions has widened. Southeast Asia has taken the largest hit in the revised forecasts, with growth expected to slow to 4.2% in 2025 and 4.3% in 2026. The subdued momentum is linked to reduced export activity and softening investment flows, compounded by structural issues in some member states.
China’s economic outlook, however, remains steady at 4.7% in 2025 and 4.3% in 2026. The stability is credited to continued policy stimulus from Beijing, aimed at strengthening domestic consumption and industrial output. Nonetheless, lingering vulnerabilities in the country’s property sector pose a medium-term risk, particularly in terms of financial stability and investor confidence.
India, another major driver of regional growth, has also seen its forecast marginally revised downward. The economy is now projected to grow at 6.5% in 2025 and 6.7% in 2026, slightly below previous expectations. While domestic consumption remains resilient, external headwinds and fiscal tightening are likely to dampen overall momentum.
In contrast to the broader trend, the Caucasus and Central Asia region has received a positive revision. Economic growth in this subregion is forecast at 5.5% in 2025 and 5.1% in 2026, supported by increased oil production and improved external demand. The upward shift underscores the varying resilience levels within developing Asia amid shifting global dynamics.
Inflation across the region is expected to remain contained. Headline inflation is projected at 2.0% in 2025 and 2.1% in 2026, as food and energy prices stabilize across key markets. This easing in price pressures gives central banks some room to maneuver, though ADB suggests they will adopt a more gradual approach to monetary easing to preserve stability and manage external shocks effectively.
The evolving global environment continues to test the adaptability of developing economies in Asia. With trade patterns shifting and geopolitical uncertainty persisting, ADB’s revised outlook serves as a reminder that the path to sustained growth will require both structural reforms and prudent policy responses tailored to regional realities.