Southeast Asia's economy shows moderate growth potential for 2026 despite U.S. tariff hikes and global trade uncertainties. Forecasts from top institutions like ADB and S&P Global indicate regional GDP expansion around 4.2%-4.3%, supported by domestic demand and tech exports.​

Key GDP Forecasts by Country

Major forecasters revised Southeast Asia projections downward due to tariff impacts, yet resilience persists in export redirection and policy easing.

Southeast Asia overall targets 4.3% growth in 2026 per ADB's September update, down from 4.7% earlier. IMF aligns at 4.3% for ASEAN, citing policy fundamentals and private sector adaptability.​

U.S. Tariffs Reshape Trade Dynamics

U.S. effective tariffs rose sharply across Asia-Pacific, up 17 percentage points since early 2021 for Southeast Asia, similar to China's post-October deal reduction. This prompts export redirection, boosting competition elsewhere but limiting supply chain shifts due to transshipment rules and legal challenges.​

Thailand faces export hits in machinery and vehicles; Singapore in pharmaceuticals (13% of U.S. exports). Yet, tech sectors like semiconductors benefit from AI demand, cushioning declines. S&P notes agreements commit Southeast governments to U.S. investments, stabilizing flows.​

Domestic Demand and Sectoral Strengths

Private consumption drives resilience, fueled by lower oil prices and rate cuts. Inflation eases to 2.5%-2.7% regionally in 2026, enabling accommodative policies.​

• Philippines and Vietnam lead with 6%+ growth from household spending and FDI surges.​
• Indonesia's steady 5% trajectory ties to infrastructure and looser policy.​
• Tourism recovery supports Thailand but weakens on Chinese visitor dips.​

Electronics exports front-loaded in H1 2025 but moderate in 2026 amid barriers. Real estate drags China (4.4% forecast), indirectly aiding ASEAN via spillovers.​

Monetary Policy and Inflation Trends

Central banks near neutral rates limit further cuts, with currencies under pressure. Regional inflation falls to 2.7% in 2026 from 3% in 2024, driven by food/energy disinflation.​

ADB highlights easing shifts: Philippines and Indonesia cut rates amid 2.3%-3.0% CPI forecasts. Vulnerabilities include household debt (Thailand) and overcapacity risks.​

Risks and Upside Opportunities

Downside risks dominate: escalated tariffs, geopolitical tensions, China property woes. Upsides from ASEAN integration—reducing nontariff barriers could add 4.3% to GDP long-term, per IMF, creating 4 million jobs.​

S&P sees brighter Asia-Pacific outlook at 4.2% excluding China, thanks to tech resilience. Vietnam bucks downgrades via stimulus; monitor U.S. policy for exemptions.​

Policymakers prioritize productivity over tariff negotiations, with AI/digital finance as growth levers.​

Sources:

• S&P (Nov 2025) Global Ratings: Economic Outlook Asia-Pacific Q1 2026​
• ADB (Sep 2025 update via Business Times): ADB slashes 2026 growth outlook​
• ADB April 2025: Asian Development Outlook​
• ADB July 2025: Update​
• IMF (Oct 2025): Next-Generation Policies for ASEAN​