The Asian Development Bank (ADB) cut its two-year growth forecast for the region Tuesday, amid a slow recovery in major industrial economies and weaker prospects for China and India.
The Manila-based bank said developing Asia's gross domestic product (GDP) growth is expected to slow to 5.8% in 2015, from 6.2% in 2014.
Growth is expected to pick up to 6% in 2016, but revised forecasts were lower than initial projections of 6.3% for both years.
"Developing Asia is expected to continue to be the largest contributing region to global growth despite the moderation, but there are a number of headwinds in play such as currency pressures and worries about capital outflows," ADB chief economist Shang-Jin Wei said.
"The region must strengthen its ability to respond to external shocks," he said. "Emerging markets are facing receding capital flows and depreciating currencies — a trend that may be exacerbated by the upcoming rise in US interest rates."
China's growth is forecast to ease to 6.8% in 2015 and 6.7% in 2016, from 7.3% in 2014, due to slowing investment and weakening exports, the report said.
The ADB initially projected growth in China to be 7.2% in 2015 and 7% in 2016.
The bank also revised down India's growth outlook to 7.4% in 2015, from an earlier estimate of 7.8%. Growth is expected to pick up to 7.8% in 2016, compared to the initial projection of 8.2%.
Southeast Asia's GDP forecast was slashed to 4.4% in 2015 and 4.9% the next year, dragged down by weak demand from China and major industrial economies.
"Thailand has yet to bounce back from its 2014 slump, while infrastructure investment has fallen behind schedule in Indonesia and the Philippines," the report said.
"Drought in several countries, and floods in Myanmar, have hurt agriculture."