Lede
The Asian Development Bank (ADB) projects that gross domestic product (GDP) growth across developing Asia-Pacific economies will decelerate to 4.7% in 2026, down from an estimated 5.0% in 2025, according to its latest Asian Development Outlook released Tuesday. The forecast reflects persistent headwinds from slowing global demand, elevated trade barriers, and domestic policy adjustments in major economies including China, Indonesia, and Vietnam.
What happened
The ADB revised its 2026 growth forecast for the region—covering 46 economies from Singapore to Thailand—down by 0.3 percentage points from its previous projection in December 2024. The report cites a moderation in export growth as advanced economies tighten import policies, alongside weaker-than-expected consumption in China, the region’s largest economy. For Southeast Asia specifically, the ADB expects GDP growth to slow to 4.5% in 2026 from 4.7% in 2025, with Indonesia and Malaysia facing headwinds from commodity price volatility. Vietnam’s growth is projected to ease to 6.2% from 6.5%, while Thailand’s recovery remains tepid at 2.8%.
Why it matters
The deceleration signals a structural shift in APAC’s growth model, which has relied heavily on export-driven expansion and Chinese demand. For analysts and executives tracking markets in Singapore, Malaysia, Indonesia, Vietnam, and Thailand, the slowdown underscores rising risks from geopolitical trade fragmentation and domestic policy uncertainty—such as Indonesia’s resource nationalism and Vietnam’s regulatory tightening. Policymakers in the region may need to pivot toward domestic consumption and intra-regional trade to sustain momentum, as external demand weakens. The ADB also warns that prolonged high interest rates in the US and Europe could further compress capital flows to emerging APAC markets.
What's next
The ADB advises APAC governments to accelerate structural reforms, including digitalization and green energy investments, to bolster productivity. The bank’s next quarterly update in July 2025 will incorporate first-half trade data and central bank policy shifts. For Singapore and Malaysia, export-dependent sectors like electronics and palm oil face near-term headwinds, while Indonesia’s nickel-processing industry may benefit from global EV demand. Analysts should monitor China’s fiscal stimulus measures and US tariff decisions in Q2 2025 for further revisions.