Asia-Pacific Growth Faces Geopolitical, Energy, Tariff Headwinds

S&P Global Ratings projects China's GDP growth to slow to 4.4% in 2026, down from 5.0% in 2025, due to weak domestic demand, a persistent housing market slide, and Middle East turmoil. While temporary U.S. tariff relief in early 2026 benefited China and India, S&P Global Ratings expects these tariffs to rise again following a "Section 301 Review of Trade Practices" launched on March 11, 2026, targeting major Asian economies.

The Middle East conflict drives higher energy prices, eroding purchasing power and straining current accounts for net energy importers like India, Japan, and Thailand. This energy shock curbs central banks' appetite for rate cuts, with S&P Global Ratings forecasting only one 25-basis-point cut by the U.S. Federal Reserve in 2026 and potential tightening in Indonesia and the Philippines.

Tech-oriented economies and sectors, boosted by AI-related investment, are outperforming, but overall export growth is expected to slow in 2026. S&P Global Ratings revised up baseline 2026 GDP growth forecasts for Asia-Pacific (excluding China) to 4.5% from 4.2%, driven by Hong Kong, India, Malaysia, Singapore, and Taiwan, but warns of a much weaker outlook under an energy market downside scenario where Brent oil averages US$185 per barrel in Q2.