Mid-year review
Asia Pacific can expect slower GDP growth in 2026 after a year of resilience amid tariff volatility and global economic uncertainty. India, mainland China and Southeast Asia are forecasted to exhibit the fastest growth in the region although the rate of GDP expansion will be slower compared to 2025. Markets with stronger growth this year will include Korea and the Pacific as fiscal and monetary measures, alongside improved domestic sentiment, stimulate economic expansion.
Forecast made in January 2026
Prepare for slower economic growth
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Asia Pacific GDP growth is on track to reach 4.3% in 2026, slower than the previous year but higher than original forecasts. Supply chain disruption caused by the Middle East conflict has failed to dent regional economic growth, which remains resilient thanks to strong exports of AI-related products. Tech-oriented economies such as Taiwan and Korea have recorded phenomenal export growth, helping boost their GDP despite slower domestic consumption. Australia is one of the major markets where GDP has been downgraded, largely because of rising interest rates.
Surprise: Exports from January-June 2026 grew 48% and 47% y-o-y in Korea and Taiwan, respectively, driven by robust demand for AI-related products.
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Central banks in Asia Pacific halted the rate cutting cycle in H1 2026, with several even starting a new upward cycle amid inflationary pressure resulting from supply chain disruption. These included the Reserve Bank of Australia (RBA), which has hiked rates three times for a total of 75bps so far this year. The Bank of Korea (BoK) has increased rates once, with a second hike possible in H2 2026.
Surprise: Despite the Monetary Authority of Singapore's (MAS) policy tightening, Singapore’s three-month compound SORA remains below end-2025 levels.
Mid-year review
With interest rates in most markets continuing to fall in 2025, the rate cutting cycle is forecasted to slow further or finally come to an end in 2026. Exceptions include Japan, where the rate hike cycle is expected to continue, and Australia, where interest rates could rise once more amid mounting inflationary pressure.
Forecast made in January 2026
Make ready for the end of the interest rate cut cycle
Forecast Accuracy
The AI boom continues to support Asia Pacific GDP growth. Aside from Taiwan and Korea, Southeast Asian markets such as Singapore, Vietnam and Malaysia registered solid export growth of over 20% y-o-y in H1 2026, driven by global AI investment and semiconductor demand.
Surprise: Despite U.S. restrictions, mainland China's substantial investment in AI is propping up its economy, with semiconductor exports soaring 96% y-o-y in H1 2026.
Mid-year review
The AI economy should help drive demand for semiconductors and other advanced high-tech manufacturing outputs in 2026, especially in Taiwan, Korea and Japan. This will help offset trade weakness in other sectors, especially as semiconductors generally remain exempt from U.S. tariffs. Mainland China continues to invest heavily in AI although it is subject to restrictions on semiconductor imports.
Forecast made in January 2026
Look to AI boom to cushion trade headwinds
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China’s 15th Five-Year Plan will boost spending on AI, expand domestic consumption, and open certain sectors to foreign investment. Reinvestment obligations for C-REIT sponsors have been removed. Hong Kong SAR has expanded tax exemptions to cover hedge funds, private credit, virtual assets, and real estate funds, while offering 0% tax on performance fees in the hope of luring financial services firms.
Surprise: Australia announced its 2026-27 Federal Budget in May 2026, introducing several tighter measures for property investors such as a new minimum 30% capital gains tax (for all types of real estate) and stricter limits on negative gearing benefits (for established residential dwellings only).
Mid-year review
With 2026 marking the start of China's latest five-year plan, the central government will unveil a series of new policies to support growth. In India, regulatory changes to enable Small and Medium REITs will provide investors with a new channel to allocate capital. Progress will continue on several major urban development schemes, including Western Sydney's International Airport (due to open mid-2026), Hong Kong SAR's Northern Metropolis, and Singapore’s 2025 Master Plan.
Forecast made in January 2026
Monitor new policies and urban planning schemes
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