The Asia-Pacific (APAC) region’s growth remains broadly stable even as the global economy adapts to rapid tariff changes, accelerating investment in artificial intelligence (AI) and evolving consumer trends, according to the annual economic outlook for 2026 released recently by the Mastercard Economics Institute (MEI).

MEI expects APAC real gross domestic product (GDP) growth to ease marginally to 3.1 per cent in 2026, compared to an estimated 3.2 per cent in 2025.

MEI notes that the global outlook for 2026 is shaped by a two-sided set of risks and opportunities. Fiscal stimulus and rapid technological progress—particularly the integration of AI into business operations—are expected to act as major tailwinds for growth, though the benefits will be uneven across regions.

At the same time, ongoing geopolitical tensions and the reconfiguration of supply chains continue to create pockets of fragmentation, adding uncertainty to trade and production. The uneven distribution of technological gains could create policy and growth hurdles for some markets, it feels.

A combination of easing inflation, supportive monetary policy and, in several markets, rising real incomes are improving household conditions and reinforcing the APAC region’s overall stability.

South Asia continues to show solid momentum. India is projected to expand at 6.6 per cent, supported by domestic demand, monetary easing and digital and services growth.

Sri Lanka is expected to grow at 3.7 per cent as private consumption, rising tourism receipts and accommodative monetary policy sustain its recovery.

Bangladesh is forecast to grow around 5 per cent, with easing inflation and remittance inflows helping households despite ongoing structural challenges.

China is forecast to grow at 4.5 per cent, with consumption strengthening through the year as new consumption categories—beauty and wellness, lifestyle upgrades and fandom-driven collectibles—gain momentum supported by expected rate cuts and targeted fiscal measures under the upcoming Five-Year Plan.

The shift toward ‘trading smart’—where consumers seek quality and unique experiences rather than just low prices—is reshaping retail and digital channels in China, especially in tier III and IV cities.

Japan is expected to grow at 1 per cent, as rising real incomes and firmer household sentiment shift the economy toward a more sustainable, wage-driven cycle. Strategic investment in AI, semiconductors and energy security continues, while accommodative monetary policy and selective fiscal measures help offset modest pressure on exports from US tariffs.

Across the ASEAN-5, growth is set to diverge. Indonesia and the Philippines are expected to remain among the region’s fastest growers at 5 per cent and 5.6 per cent respectively.

Meanwhile, Malaysia and Singapore should see growth normalise to 4.2 per cent and 2.2 per cent respectively, while Thailand is forecast at 1.8 per cent. Key risks include energy price volatility and shifts in global demand that may affect employment.

In Australia and New Zealand, easing cost pressures and lower interest rates are expected to lift household spending, with growth forecast at 2.3 per cent and 2.4 per cent respectively. Experiential spending continues to drive recovery.

Across the APAC region, small and medium enterprises (SMEs) are leaning into digital tools and online channels to streamline operations and reach customers, reinforcing resilience amid changing trade dynamics.

Fibre2Fashion News Desk (DS)