Macroeconomic overview
Sections: GDP growth Inflation
GDP growth
The macroeconomic outlook for APAC and GCC economies as we move in to 2026 shows signs of resilience despite global trade tensions and tariff pressures.
The IMF has raised APAC’s 2025 growth forecast to 4.5%, up by 0.2 percentage points, driven by robust domestic demand and policy easing in several economies. All reported APAC countries, except for South Korea, increased their growth estimates. Early trade activity ahead of new tariffs helped offset some pressure from rising global barriers, though risks from higher US tariffs and slowing global demand persist. Growth is projected to moderate to 4.1% in 2026. Across individual economies, the outlook remains cautiously optimistic, with most countries receiving upward revisions to their 2025 forecasts. In the GCC, both KSA and the UAE continue to post strong growth driven by higher oil production and continued expansion in the non-oil sector. Strategic investment in technology and infrastructure, combined with an AI-driven investment boom, are creating opportunities across advanced manufacturing and data-led industries, alleviating some of the risks posed by trade uncertainty. This rapid growth, however, could see an abrupt correction in AI investment and remains a key downside risk to the global outlook.¹
Australia
The IMF expects Australia’s economy to have grown by 1.8% in 2025, 0.2 percentage points above its April estimate, supported by stronger household spending and monetary policy easing. Looking ahead, growth is projected to reach 2.1% in 2026, supported by improved financial conditions, despite slower public spending and moderating income gains. However, while risks from higher tariffs and trade barriers persist, the probability of a sharp downturn has decreased since last year.¹
India
The IMF raised India’s 2025 GDP growth projection to 6.6% in October, up from 6.2% in April, citing strong reforms, rapid digital adoption, and robust first-quarter momentum. This upgrade more than offsets the impact of higher US tariffs on Indian imports since July. Growth is projected to ease to 6.2% in 2026, slightly below pre-tariff estimates due to trade fragmentation and ongoing tariff pressures. India is expected to remain the fastest-growing major economy, supported by resilient domestic demand amid continued policy support, easing inflation, and GST rationalisation.² ³
Japan
The IMF upgraded Japan’s 2025 GDP growth projection to 1.1% in October, up from 0.6% in April. Strong household spending, fiscal measures taking effect, higher public and private investment, and a rebound in tourism drove the improvement, offsetting tariff-related headwinds. Growth is expected to slow to 0.6% in 2026 as external uncertainty and higher tariffs weigh on exports and production. Overseas demand is weakening, but global AI-related investment should provide some support for Japan’s technology-driven exports.⁴
Malaysia
The IMF raised Malaysia’s 2025 GDP growth projection to 4.5% in October, up from 4.1% in April. Strong first-quarter trade activity amid front-loading in international trade, robust domestic consumption, and a rebound in manufacturing drove the upgrade and offset tariff-related uncertainty. The IMF expects growth to slow to 4% in 2026, as global risks could weigh on exports of electrical and electronic products.⁵
Singapore
The IMF raised Singapore’s 2025 GDP growth projection to 2.2% in October, up from 2.0% in April. Strong performance in manufacturing, construction, and consumer-facing sectors drove the upgrade, supported by a sustained tech cycle and capital inflows. Growth is expected to moderate to 1.8% in 2026 as activity normalises in trade-related sectors. However, ongoing global investments in AI will support the domestic manufacturing sector, while growth in construction and financial services should be bolstered by infrastructure investment and accommodative financial conditions, respectively.⁶ ⁷
South Korea
In April 2025, South Korea’s GDP growth was projected at around 1%, which was later downgraded to 0.8%. However, in the recent October update, GDP growth has been increased by 0.1 percentage points, bolstered by a strong semiconductor sector, policy easing, and stronger-than-expected global recovery momentum, despite weak domestic demand. Growth is expected to increase to 1.8% in 2026, with a smaller slowdown than previously projected due to lower-than-expected tariff hikes, though trade-related uncertainties and a weak domestic construction industry still pose risks.⁸ ⁹ ¹⁰
Taiwan
The IMF estimated Taiwan’s real GDP growth to be 3.7% in 2025, up from the estimate of 2.9% in April, driven by stronger global recovery momentum, sustained semiconductor production to meet AI-driven demand, and trade diversification efforts. Growth is projected to slow to 2.1% in 2026, as global tariffs put pressure on export activity.¹¹ ¹² ¹³
KSA
The IMF has upgraded its estimate of KSA’s 2025 GDP growth from 3% in the April 2025 update to 4% in the October update, due to improved oil revenues and strong non-oil activities, driven by investment in manufacturing, advanced technology, tourism, and construction linked to Vision 2030. Growth is projected to remain at 4.0% in 2026, supported by continued domestic demand momentum and regional recovery as oil production disruptions and conflict impacts abate, though global uncertainties continue to pose risks.¹⁴ ¹⁵
UAE
The IMF estimated the UAE’s real GDP growth to be 4.8% in 2025, up 0.5 percentage points from April projections, driven by higher oil production and robust non-hydrocarbon sector growth led by manufacturing, financial services, large-scale infrastructure projects, and real estate. The positive momentum is expected to continue in 2026, with the economy likely to accelerate to 5%. While a gradual rise in hydrocarbon output following OPEC+ decisions will support overall growth, non-oil growth will be led primarily by government spending on development and private investment expansion.¹⁶
Inflation
Inflation in the APAC region was expected to remain moderate in 2025, supported by lower global commodity prices, improved supply chains, and stable monetary policies. However, increased trade tensions, including new US tariffs and possible retaliatory actions, may raise the cost of imported goods. The IMF notes that while headline inflation is close to target levels, core inflation may remain above central bank targets in some advanced economies. In the GCC, inflation is projected to stay low and stable, supported by government subsidies, currency pegs to the US dollar, and diversification efforts that reduce exposure to external shocks.¹
Australia
Australia’s inflation is estimated at 2.6% for 2025, slightly higher than the April projection, driven by rising costs for new dwellings and market services. Consumer demand and house prices are picking up faster than expected, limiting room for further interest rate cuts. Inflation is forecast to rise modestly to 3.0% in 2026 as core inflation remains sticky and government electricity rebates expire.¹
India
India’s consumer price inflation declined for nine consecutive months, hitting an eight-year low of 1.6% in July 2025, before rising to 2.1% in August due to higher food prices. In September, CPI fell further to a 99-month low of 1.54%, driven by lower food and beverage costs. GST rate rationalisation in September simplified taxes and reduced prices across several product categories, impacting over 11% of the CPI basket. The trend continued in October, with retail inflation dropping to a historic low of 0.25%. Inflation for 2025 is projected at 2.8%, down from the April estimate of 4.2%, marking the lowest rate among major regional economies. In 2026, inflation is expected to rise to 4.0% due to tariff pressures and as demand strengthens.²
Japan
Overall inflation in Japan remains above the Bank of Japan’s 2% target. The IMF's October 2025 outlook expects overall CPI inflation to have averaged about 3.3% in 2025. Price pressures have shifted from imported costs to domestic factors, such as wages and services. Energy prices and government subsidies for education are also helping contain inflation, but food prices continue to push it higher. Inflation is expected to ease to 2.1% in 2026, moving closer to the BOJ’s target as cost-push factors dissipate and demand growth stabilises. However, the recent increase in minimum wages could keep service prices elevated and slow the pace of moderation.³ ⁴
Malaysia
Malaysia’s inflation for 2025 is estimated to remain contained at 1.6%, down from the earlier projection of 2.4%, driven by steady domestic demand, stable global cost conditions, and improved policies that supported household purchasing power. Subsidy reforms are being phased out gradually rather than withdrawn abruptly, keeping domestic price adjustments in check. Inflation, however, is projected to rise to 2.2% in 2026 with a 10% hike in excise duties on alcohol and tobacco introduced in Q4 2025, and ongoing global uncertainties.⁵ ⁶
Singapore
Singapore’s inflation for 2025, previously projected at 1.3% in the IMF’s April 2025 estimate, is expected to remain at 0.9%, supported by government subsidies for long-term care services and subdued import and domestic cost pressures. Lower costs for crude oil, capital goods, and retail items have passed through to consumer prices, while slower wage growth and improved labour productivity have eased unit labour costs. Inflation is forecast to rise to 1.3% in 2026 as imported cost pressures diminish and domestic service labour costs pick up amid normalising productivity growth.⁷
South Korea
South Korea’s inflation has held close to the 2% target and is projected to remain at 2% in 2025, reflecting subdued economic activity and lower oil prices. As the economy improves, downward pressure from weak demand may ease, while exchange rate movements could add upward pressure. For 2026, inflation is expected to edge up slightly to 1.8% as global oil prices moderate and domestic demand strengthens.⁸
Taiwan
Taiwan’s inflation averaged 1.8% in the first eight months of 2025, with core inflation at 1.6%. CPI fell to a 51-month low of 1.4% YoY in June 2025, mainly because of broad-based cooling, though food prices saw minor upticks due to weather disruptions. For 2025, the IMF forecasted inflation at 1.7%, with further decline to 1.6% in 2026 amid a downward trend in domestic services inflation. Future inflation will depend on global commodity prices, domestic service costs, and weather conditions.⁹ ¹⁰
KSA
KSA’s inflation is expected to remain low at 2.1% in 2025, supported by lower energy costs and high real interest rates, which were recently reduced following the US Federal Reserve's rate cut. Declines in transport and communication costs have offset rising housing rents, while real wages have stayed stable, with slight gains for highly skilled workers. For 2026, inflation is projected to remain around 2%, helped by the currency peg to the US dollar, domestic subsidies, and an elastic supply of expatriate labour. The IMF expects imported inflation from global tariff increases to stay contained.¹¹
UAE
UAE inflation is expected to stay low at 1.6% in 2025, helped by lower energy and non-energy commodity prices. These factors have reduced transportation and food costs, which are major parts of consumer spending, along with tighter fiscal policies. Inflation is likely to rise slightly to 2.0% in 2026, primarily due to the base effect from the reduced CPI inflation rate in 2025.¹² ¹³
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