Developing economies in Asia and the Pacific are forecast to expand by 4.9 percent on average this year and 4.7 percent in 2026, partly due to trade uncertainty and higher U.S. tariffs, a new report by the Asian Development Bank (ADB) said on Wednesday.

The Asian Development Outlook (ADO) for April 2025 forecast that inflation in the region would moderate further to 2.3 percent in 2025 and 2.2 percent in 2026, as declining global oil and other commodity prices will continue to reduce price pressures in the region.

ADB Chief Economist Albert Park said in the highlights of the report that forecasts for the region, which were finalized before new U.S. tariffs were announced on April 2, show growth in developing Asia "moderating" this year and next.

Park said the region will be challenged by rising trade barriers and significant trade uncertainty, but solid domestic demand and electronics exports will support growth.

Park also warned of looming downside risks, saying that full implementation of the new U.S. tariffs and escalating geopolitical tensions could disrupt prospects.

"Asia and the Pacific stands at a critical juncture," ADB President Masato Kanda said in the foreword of the report. "The region now faces a complex economic landscape, with increasing trade tensions, policy shifts, and geopolitical conflict."

Kanda said further enhancing regional cooperation is "essential" to address shared vulnerabilities, such as supply chain fragility, energy security, and disasters.

"Strengthening institutions for cross-border cooperation will provide solid fundamentals for sustained growth and stability," Kanda said.