Economic Outlook for Developing Asia: Growth Amid Challenges

The Asian Development Bank (ADB) has revised its growth forecasts for developing Asia, projecting a growth rate of 5.1% for 2025, an increase from the previously estimated 4.8%. This optimistic outlook is largely attributed to strong demand for high-tech products and India's robust economic performance, which saw a growth rate of 8.2% in its fiscal second quarter ending September. The ADB also raised its 2026 growth forecast for the region to 4.6%, citing reduced trade uncertainties following several U.S. trade agreements.

ReutersBusinessWorldSlowing trade in 2026 could crimp Asia’s growth momentum, but expect tech run to continue, say economistsSouth Asia : between solid growth and major challenges

South Asia is expected to lead the growth in the region, with a projected increase of 6.5% for 2025, up from 5.9%. However, the region faces significant risks, including geopolitical tensions and climate-related disruptions, as evidenced by severe flooding in Indonesia, Thailand, and Malaysia. Meanwhile, China's growth outlook for 2025 has been adjusted to 4.8%, still below its target of 5.0%, primarily due to ongoing weaknesses in the property market.

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As the U.S. imposes tariffs, trade patterns are shifting. Canadian trade relations with Asia are strengthening as Canada seeks to diversify its trade partnerships, particularly with Indonesia and the United Arab Emirates. The ADB's report highlights that while Southeast Asia is expected to grow by 4.5% in 2025, the region's economic stability is threatened by global uncertainties and domestic political developments.

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Despite the positive growth outlook, experts warn of potential pitfalls. The World Bank has noted that South Asia's growth is vulnerable to external shocks, including a prolonged global economic slowdown and rising trade tensions. Additionally, the ADB has expressed concerns over the Philippines' growth forecast, which has been cut to 5% for 2025 due to weak infrastructure spending amid corruption investigations and natural disasters.

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The ADB emphasized that while regional growth is expected to moderate, the strength of exports, particularly in the AI and electronics sectors, will help sustain economic activity. However, it also cautioned that trade policy uncertainties and financial market volatility pose significant risks to the outlook.

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• “While regional growth is expected to moderate next year, export strength, underpinned by the upturn in the AI and electronics cycle, will help to sustain economic activity, alongside lower trade uncertainty,” — Asian Development Bank

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• “South Asia remains a driver of the global economy, but its growth is vulnerable to several external shocks,” — World Bank

South Asia : between solid growth and major challenges

• “due to weak infrastructure spending amid investigations of publicly funded projects, and natural hazards.” — Asian Development Bank

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Looking ahead, the ADB and other institutions are calling for coordinated reforms in trade liberalization and skill development to ensure sustainable growth in the region. The focus will be on enhancing regional connectivity and addressing vulnerabilities in the labor market, particularly as the adoption of AI technologies continues to reshape job landscapes.

South Asia : between solid growth and major challenges