Escalating conflict and strong El Nino are two main risks for developing Asia and the Pacific economies, according to a report released by the Asian Development Bank (ADB) on Wednesday.

The Asian Development Outlook (ADO) September 2026 forecasts that growth in developing Asia and the Pacific will moderate from 5.5 percent in 2025 to 5 percent this year before edging up to 5.1 percent in 2027. The projection is 0.1 percentage points higher than the previous outlook in July.

According to ADB, the inflation forecast of Asia-Pacific developing economies for 2026 is trimmed to 4.2 percent from 4.3 percent in July, as price stabilization measures partly offset the impact of persistently high energy prices.

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However, the inflation forecast for 2027 is revised up slightly to 3.5 percent, compared with 3.4 percent in July. The revised inflation projections for both years remain above the 3 percent recorded in 2025.

ADB said a broadening of the Middle East conflict and an intensification of the Russia-Ukraine conflict could keep global energy prices elevated and volatile, and spill over to other commodities.

The report also noted that a very strong El Nino is forecast to persist through the first quarter of 2027. The weather could be drier and cause smaller harvests and reduced hydropower, raising energy demand, lowering agricultural production, and pushing up fuel and food prices.

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ADB President Masato Kanda said governments need to prepare and protect the people most exposed, against the backdrop of strengthening El Nino, prolonged energy crisis, and renewed risks in financial markets.