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Economic Forecasts For Asia And The Pacific: July 2025 Update
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The Asian Development Outlook’s latest figures signal a modest easing of growth across Developing Asia in 2025 and 2026, alongside some progress in bringing inflation under control. Here’s what the July 2025 forecast tells us about the region’s economic prospects.
Growth is steady, but momentum is slowing
Growth in Developing Asia as a whole is expected to moderate slightly to 4.7% in 2025, down from an estimated 4.9% in April’s forecast. In 2026, growth is projected to ease further to 4.6%. A similar pattern is evident when excluding the People’s Republic of China (PRC), with growth forecasts of 4.8% in 2025 and 4.9% in 2026.
Across subregions, South Asia remains the standout performer, with robust growth projected at 6.2% in both 2025 and 2026, thanks in large part to India’s strong momentum. India’s economy is forecast to expand by 6.7% in 2025, slightly higher than the April estimate, before slowing marginally to 6.6% in 2026.
Southeast Asia is forecast to grow at 4.3% in 2026, following 4.7% in 2025, reflecting a slight softening of activity across key economies such as Indonesia and Malaysia. Meanwhile, East Asia is expected to see the most subdued growth, holding at 4.0% in both 2025 and 2026, weighed down by the PRC’s more modest projections of 4.3% in both years.
The smaller economies of the Pacific are projected to grow by 3.6% in 2025 and 3.5% in 2026, marking a slight downward revision from earlier expectations.
Inflation eases but varies across subregions
On the inflation front, the news is more encouraging. Developing
Asia’s inflation rate is projected to decline to 2.0% in 2025 before edging up slightly to 2.1% in 2026. This marks a significant improvement from the 2.6% estimated for 2024.
Subregional differences are notable. Inflation in South Asia is expected to ease to 4.4% in 2025, down from 4.9% in 2024, and stabilize at 4.5% in 2026. In Southeast Asia, inflation is forecast to remain moderate at around 2.6–2.7% in 2025–2026.
By contrast, Caucasus and Central Asia continues to face higher price pressures, with inflation expected at 7.8% in 2025 before declining to 6.7% in 2026.
East Asia and the Pacific are expected to see the lowest inflation rates in the region, hovering below 1% in East Asia and holding steady at 3.4–3.7% in the Pacific.
The road ahead
These forecasts reflect the region’s gradual transition to more sustainable, if slower, growth following the post-pandemic rebound. While inflationary pressures appear largely under control, persistent risks remain — including geopolitical tensions, climate-related shocks, and potential volatility in global financial markets.
The region’s policymakers will need to continue balancing support for growth with measures to safeguard price stability and fiscal sustainability.
The July 2025 update provides a clear message: while Developing Asia continues to be a key driver of global growth, the pace is tempering, and vigilance remains essential to ensure a resilient and inclusive economic future.
Growth is steady, but momentum is slowing
Growth in Developing Asia as a whole is expected to moderate slightly to 4.7% in 2025, down from an estimated 4.9% in April’s forecast. In 2026, growth is projected to ease further to 4.6%. A similar pattern is evident when excluding the People’s Republic of China (PRC), with growth forecasts of 4.8% in 2025 and 4.9% in 2026.
Across subregions, South Asia remains the standout performer, with robust growth projected at 6.2% in both 2025 and 2026, thanks in large part to India’s strong momentum. India’s economy is forecast to expand by 6.7% in 2025, slightly higher than the April estimate, before slowing marginally to 6.6% in 2026.
Southeast Asia is forecast to grow at 4.3% in 2026, following 4.7% in 2025, reflecting a slight softening of activity across key economies such as Indonesia and Malaysia. Meanwhile, East Asia is expected to see the most subdued growth, holding at 4.0% in both 2025 and 2026, weighed down by the PRC’s more modest projections of 4.3% in both years.
The smaller economies of the Pacific are projected to grow by 3.6% in 2025 and 3.5% in 2026, marking a slight downward revision from earlier expectations.
Inflation eases but varies across subregions
On the inflation front, the news is more encouraging. Developing
Asia’s inflation rate is projected to decline to 2.0% in 2025 before edging up slightly to 2.1% in 2026. This marks a significant improvement from the 2.6% estimated for 2024.
Subregional differences are notable. Inflation in South Asia is expected to ease to 4.4% in 2025, down from 4.9% in 2024, and stabilize at 4.5% in 2026. In Southeast Asia, inflation is forecast to remain moderate at around 2.6–2.7% in 2025–2026.
By contrast, Caucasus and Central Asia continues to face higher price pressures, with inflation expected at 7.8% in 2025 before declining to 6.7% in 2026.
East Asia and the Pacific are expected to see the lowest inflation rates in the region, hovering below 1% in East Asia and holding steady at 3.4–3.7% in the Pacific.
The road ahead
These forecasts reflect the region’s gradual transition to more sustainable, if slower, growth following the post-pandemic rebound. While inflationary pressures appear largely under control, persistent risks remain — including geopolitical tensions, climate-related shocks, and potential volatility in global financial markets.
The region’s policymakers will need to continue balancing support for growth with measures to safeguard price stability and fiscal sustainability.
The July 2025 update provides a clear message: while Developing Asia continues to be a key driver of global growth, the pace is tempering, and vigilance remains essential to ensure a resilient and inclusive economic future.
Jul 23, 2025
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