Asia will get steady growth next year, defying global headwinds, says Mastercard’s chief APAC economist

Mastercard Economics Institute expects Asia‑Pacific real GDP to ease only modestly to 3.1% in 2026 (from 3.2% in 2025), driven by heavy regional investment—particularly in technology and AI-related infrastructure—and a high degree of intra‑regional FDI (about 75%) that is prompting supply‑chain diversification away from the U.S. Within ASEAN growth will diverge: Indonesia is forecast to expand steadily near 5% supported by fiscal and investment activity, the Philippines should rebound in 2026 after 2025 shocks, while Malaysia, Singapore and Thailand slow (Thailand to about 1.8% amid rapid ageing). A rising, digitally savvy middle class and a tourism resurgence are bolstering consumption and services across the region, suggesting selective opportunities in supply‑chain capacity, infrastructure, consumer discretionary and travel sectors, even as country‑specific demographic and cyclical risks persist.

Analysis

Mastercard Economics Institute (MEI) projects Asia-Pacific real GDP will ease only slightly to 3.1% in 2026 from 3.2% in 2025, citing sustained regional investment—notably technology and AI-related infrastructure—as the primary growth driver. MEI highlights that roughly 75% of APAC foreign direct investment originates within the region, underpinning a shift toward intra‑regional supply‑chain diversification as U.S. trade reliability wanes. David Mann attributes resilience to this thick regional capital network and targeted capex that supports capacity expansion across China, Japan, South Korea and neighbouring markets.

Within ASEAN, MEI forecasts divergent trajectories: Indonesia is expected to grow around 5% supported by fiscal and investment expansion, the Philippines should rebound in 2026 after 2025 shocks, while Malaysia, Singapore and Thailand will moderate. Thailand is singled out for a slowdown to about 1.8% tied to rapid population ageing and record‑low birth rates, introducing structural downside risk to domestic demand. The report implies country‑specific allocation and risk differentiation are necessary within ASEAN.

Consumption and services are positive cyclical offsets as a rising, digitally savvy middle class and a tourism resurgence boost spending; MEI notes tourism dispersion beyond top destinations and examples such as Thailand’s post‑pandemic rebound. The mildly positive sentiment and market impact scores (around 0.3) suggest modest lift for payments, consumer discretionary, travel and infrastructure suppliers, while geopolitical/tariff risks remain key downside event risks to monitor.

Key Decisions for Investors

• Increase selective exposure to APAC infrastructure, AI-related technology suppliers and regional industrials that benefit from intra‑regional FDI and supply‑chain capacity expansion, while sizing positions for execution risk
• Consider modest overweight in regionally exposed payments and consumer names (e.g., firms tied to cross‑border and domestic spending) that should benefit from a rising middle class and tourism recovery, but limit concentration to account for policy volatility
• Reduce cyclical domestic exposure to economies flagged for structural slowdown—notably Thailand—or hedge such positions given the 1.8% growth forecast and demographic headwinds
• Monitor near‑term catalysts closely: announcements on US tariffs or trade policy, FDI flows and capex plans for AI/infrastructure, and tourism arrival data; use those indicators to time incremental buys or hedges