APEC Lifts Growth Outlook as Trade Holds, AI Investment Surges

Economic growth in the Asia-Pacific region is projected at 3.2 percent in 2025, with growth expected to hold at 3.1 percent in 2026, according to the latest APEC Regional Trends Analysis report, even as rising trade restrictions and policy uncertainty weigh on the medium-term outlook.

Growth is expected to slow to 2.9 percent in 2027 as structural constraints, trade fragmentation and geopolitical risks become more constraining.

The revised outlook marks an upward adjustment from earlier projections, pointing to stronger momentum through 2026 as consumption remains resilient and investment in technology-intensive sectors stays elevated.

“Near-term growth prospects have improved, supported by resilient demand, robust trade performance and strong AI-related investment,” said Carlos Kuriyama, Director of the APEC Policy Support Unit. “At the same time, rising trade restrictions and policy uncertainty are increasingly weighing on medium-term growth.”

Trade has held up better than expected despite global fragmentation. Merchandise trade volumes through the first three quarters of 2025 rose 8.0 percent for exports and 7.6 percent for imports from a year earlier, supported by strong demand from technology-intensive industries.

Policy headwinds are building, the report warned, as trade-restrictive measures rose sharply in 2025. This is driven by new tariff and non-tariff actions that outpaced trade-facilitating initiatives and raised costs and uncertainty for businesses.

“Firms have adapted quickly to changing trade conditions, helping sustain trade volumes,” said Rhea C. Hernando, an analyst with the APEC Policy Support Unit. “But the proliferation of trade restrictions is making these adjustments more costly and complex.”

Trade in commercial services continued to expand, though growth slowed from 2024’s rapid rebound as travel services eased from earlier double-digit growth rates, partly offset by steadier expansion in transport and other commercial services.

Inflation across most Asia-Pacific economies continued to ease in 2025, with average inflation estimated at around 2.4 percent, down from 2.6 percent in 2024, reflecting lower energy prices, moderating food costs and improved supply conditions.

“Easing inflation has given central banks greater policy space to support growth,” said Glacer Niño A. Vasquez, a researcher with the APEC Policy Support Unit. “But risks remain, particularly from renewed trade restrictions and geopolitical shocks.”

“Current-account imbalances across the region have widened since the pandemic, increasing exposure to external shocks and financial volatility as surpluses grow larger and deficits deepen,” Kuriyama added.

Record-high semiconductor sales driven by AI demand are lifting productivity, but investment is increasingly concentrated, raising risks around market concentration, supply-chain exposure and the durability of expected returns.

The report suggests that APEC member economies reinforce policy credibility, align AI investment with workforce upgrading, and deepen regulatory coordination to sustain growth and reduce uncertainty as global economic fragmentation persists.