S&P Global has kept its baseline 2026 APAC GDP growth forecasts excluding China unchanged from March at 4.5 per cent; it sees 2027 growth at 4.4 per cent.
Growth forecasts for APAC economies exposed to the AI-led tech export boom have been revised up, while others face downward revisions.
Monetary policy will tighten modestly in the region.
China’s economy is likely to stay subdued.
S&P Global’s baseline forecast assumes disruptions in the Strait of Hormuz will gradually ease in the second half of the year. It expects global oil prices to remain elevated in the coming months. They should ease gradually thereafter, returning to pre-crisis levels in early 2028.
US tariffs levels on APAC economies and the differentials between them could rise again. According to the company’s estimates, in April 2026 US effective tariffs were 23 per cent on China, 14.6 per cent on Indonesia and 2-10 per cent on other APAC economies.
It expects sluggish domestic demand in China. Consumption and investment momentum slowed further in the second quarter amid the persistent slide in the housing market, an apparent fiscal tightening, and weak confidence. A significant acceleration seems unlikely any time soon, given the absence of fiscal stimulus plans.
China’s exporters are benefiting from the AI-related Asian tech export boom, which pushes up both volumes and prices of tech products.
Import values have recently also risen fast, but this doesn’t reflect strong domestic demand, in S&P Global’s view.
In all, it projects 4.4 per cent overall real gross domestic product (GDP) growth in China in 2026, broadly unchanged from earlier. The key downside is a pronounced slowdown driven by external or policy-induced shocks, amplified by a fall in confidence.
APAC economic growth largely held up in early 2026. In the first quarter, GDP growth met or exceeded expectations in most economies, with generally solid contributions from both exports and domestic demand.
However, growth significantly lagged expectations in the Philippines. Growth was also somewhat below expectations in Australia.
The energy stress is weighing on the region’s economies. Most rely heavily on Middle East supply. In some economies, economic activity is disrupted by sectoral shortages of refined products or petrochemical inputs and government measures to save energy consumption.
However, exports have grown strongly in recent months. In particular, surging AI-related demand is fueling an Asian tech export boom. This is a major boost to growth where the economic importance of tech manufacturing is high. This is especially so in Taiwan, South Korea and Vietnam, but it is also significant in Singapore, China, Malaysia, Thailand and Japan.
The Australian economy has operated at or close to capacity, giving it little room to absorb the energy price shock. S&P Global expects higher prices and interest rates to weigh on demand in the second half of the year. It cut its growth forecast for the country by 0.1 percentage points (pps) for both this year and next to 1.9 per cent and 1.6 per cent respectively.
It project real GDP growth in Australia will slow to 6.6 per cent in the fiscal ending in March 2027, compared with 7.7 per cent in FY26, amid the energy stress, expectations of a sub-par monsoon and slowing global growth.
Government subsidies in Japan shield consumers from much of the impact of higher global energy prices. Wage growth has turned positive in real terms, boding well for consumption. Still, with plans for fiscal expansion having been dialed down, S&P Global now expects GDP growth to slow to 0.6 per cent in 2026.
The outlook for the Southeast Asian region is balanced between strong electronics-related activity, broadly steady domestic demand, and the energy stress.
In addition to benefiting from the tech export boom, most Southeast Asian economies are seeing data center investment that supports construction and capital spending. That is especially the case in Malaysia, Thailand and Vietnam.
Overall, S&P Global has slightly lowered its forecast for the region on a large downward revision in the Philippines and stable forecasts elsewhere.
Fibre2Fashion News Desk (DS)
