- Article
- Global Research
- General Research Insights
- Emerging markets
- Macro and rates outlook
Beyond the razzmatazz
- Trade tensions are set to intensify, weighing on exports and investment across Asia
- But cooling inflation and policy easing should provide a floor under domestic demand …
- helping the region’s economies endure the challenges in the Year of the Snake with customary poise
Asian Economics Quarterly
Tariffs are front and centre. The world’s trading system is being reconfigured, with the US seeking to erect permanent barriers. For Asia, this poses severe challenges. Not only will supply chains need to be rejigged, new markets explored, and investment redirected, but the time has come to unleash, at last, the great, yet dormant, engine of sustained prosperity: the local consumer.
This does not mean, however, a wholesale turn away from global markets: rather, even greater engagement with those still willing to engage. In the Year of the Snake, Asia’s vaunted resilience will once more be on display.
This time, unlike the first administration of President Trump, the impact on trade and investment in Asia, and indeed the world, could be a lot quicker and more severe. The world, faced with exceptional US policy changes, is beginning to respond, notably in Europe and in China, offering some offset to the inevitable challenges to come.
In mainland China extra fiscal spending and a shift towards prioritising household spending should offer support to domestic demand, even if challenges, like the wobbly real estate market, persist. As a result, we recently raised our GDP growth forecast for this year from 4.5% to 4.8%. In Hong Kong, headwinds persist, though the economy should still manage to chug along at a relatively steady pace. Taiwan continues to ride the strength of the AI-hardware boom, and while growth may cool, it should remain robust.
4.8%
Our 2025 mainland China GDP growth forecast
Japan’s economy is counting on consumers showing their strength, buoyed by increasing wages and a tailwind from fiscal policy, allowing the central bank to keep raising interest rates. In Korea, political uncertainty is still weighing on local demand, just as the external environment has become more uncertain as well, but extra fiscal spending and rate cuts should help.
Australia remains remarkably resilient, with growth looking up this year as monetary easing comes into play. In New Zealand, the going has been tougher, though full-year growth should turn positive in 2025.
In India, growth on the local side may even pick up a tad, even if the outlook for exports is cloudier. Rate cuts and quicker fiscal disbursements on infrastructure this year should certainly help. In Sri Lanka, gradual and steady progress continues, though continued reforms are needed to push up trend growth. Bangladesh has yet again proven its resilience, and growth is expected to tick up over the coming fiscal year.
Indonesia is looking to rate cuts to help its economy and appears less exposed to the global tariff turmoil than many of its neighbours. Thailand may clock a similar pace as last year, even if the consumer looks increasingly out of breath. The Philippines may step it up a notch, driven by domestic momentum and limited exposure to global trade tensions. In Malaysia, investment is still strong, on both the public and private side, providing a floor to growth as the trade outlook turns more uncertain. Singapore will not fully escape the global turmoil, being a more open economy than most, but a slight fiscal lift will cushion things at home. In Vietnam, growth ambitions remain high, even as the risk of tariffs clouds the outlook, which may force greater fiscal spending.
In the Year of the Snake, Asia’s vaunted resilience will once more be on display, even if the needed adjustment will take toil and sweat to complete.
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