NESDC warns Asia and ASEAN may slow in 2026 as trade and geopolitical risks mount

Thailand’s National Economic and Social Development Council (NESDC) has warned that many major Asian and ASEAN economies are likely to face slower growth in 2026, citing a broad set of risks ranging from a global slowdown and intensifying trade tensions to prolonged geopolitical conflicts and domestic constraints in individual countries.

The NESDC said its assessment of regional economies suggests momentum is expected to cool in 2026 compared with 2025, as the impact of trade barriers imposed by major economies becomes more visible in global demand and world trade volumes.

It also pointed to additional downside risks ahead, including a possible downturn in the electronics cycle amid tougher competition, continued uncertainty over US trade policy, and the risk of more targeted import tariffs, particularly on electronics-related products.

China’s measures to control rare-earth minerals could further affect investment and exports in electronics, while geopolitical conflicts are still expected to drag on, weighing on confidence and supply chains across the region.

Japan's growth is seen easing to 0.7% in 2026

The NESDC expects Japan’s economy to expand by 0.7% in 2026, slowing from 1% in 2025, mainly due to the impact of US import tariffs on manufacturing and exports.

It cited the manufacturing purchasing managers’ index (PMI), which fell to 48.3 in October, the lowest level in 21 months, as a sign of weakening factory activity.

While wages are expected to rise following Japan’s annual spring wage talks (Shunto) in 2026 and after a 6.3% increase in the minimum wage announced in October 2025, the NESDC said real wages are still likely to decline because inflation is running ahead of wage growth.

Even so, Japan may receive support from a record-high fiscal 2026 budget, alongside continued private investment driven by high backlogs of machinery orders in late 2025 and increased investment in equipment to address labour shortages, in line with the government’s economic restructuring efforts.

On monetary policy, the NESDC said the Bank of Japan is expected to raise its policy rate further in 2026, given still-low real interest rates and the need to bring inflation back towards the 2% target.

China's growth forecast at 4.4% as exports and property remain weak

China’s economy is projected to grow 4.4% in 2026, slowing from 5% in 2025, according to the NESDC.

The council said growth is likely to soften as export momentum fades due to the effects of US import tariffs and a high comparison base after exports accelerated in 2025.

It added that industrial activity is also showing signs of slowing, consistent with a decline in advance orders.

Domestic demand is expected to remain subdued, with investment still weak, particularly in the property sector.

The NESDC also noted that the boost from government stimulus measures is fading, while rising public debt is tightening the room for further fiscal support, especially for local government investment.

Despite these pressures, the NESDC expects the People’s Bank of China to maintain an accommodative monetary stance, keeping policy rates low to support stability amid both domestic and external headwinds.

India's growth is seen moderating to 6.5% as US tariffs bite

India’s economy is forecast to expand 6.5% in 2026, easing from 7% in 2025, the NESDC said.

It attributed the softer outlook to weaker exports and slower industrial production linked to higher US import tariffs.

The NESDC highlighted that the US “retaliatory” tariff rate applied to India is 50%, higher than that imposed on many other countries, which could weigh on exports and competitiveness going forward.

Still, the council expects India to be supported by domestic demand, helped by tax reform measures aimed at boosting consumption and easing households’ tax burdens during fiscal years 2025–2026 and 2026–2027.

With inflation pressures seen as relatively low, the NESDC said the Reserve Bank of India should be able to keep monetary policy supportive.

Newly industrialised economies: mixed picture as electronics supply chains face pressure

The NESDC said most newly industrialised economies (NIEs) are expected to slow in 2026 as exports weaken under the combined impact of US import tariffs and China’s controls on critical minerals—factors that could disrupt supply chains for electronics and semiconductors, key export sectors for these economies.

At the same time, governments across the group are expected to pursue proactive economic policies to accelerate infrastructure investment and upgrade targeted industries, with an emphasis on technology, innovation and national infrastructure.

Low inflation is also expected to allow broadly accommodative monetary policy to continue.

For 2026, the NESDC forecasts:

• Taiwan: 2.4% growth (down from 5% in 2025)
• Hong Kong: 2.0% (down from 2.6%)
• Singapore: 1.8% (down from 3.5%)

South Korea is the main exception in the group, with growth expected to pick up to 1.8% in 2026 from 1.1% in 2025, supported by a recovery in domestic consumption, the NESDC said.

ASEAN's slower growth is expected, with domestic demand still a key support

Across ASEAN, the NESDC expects growth in most economies to slow from 2025 levels due to weaker exports amid US trade barriers.

However, domestic consumption and government spending are still expected to play an important role in supporting growth in 2026, alongside accommodative monetary policy under low inflation trends.

The council forecasts the following 2026 growth rates:

• Indonesia: 4.7% (from 4.8% in 2025)
• Malaysia: 4.2% (from 4.4%)
• Vietnam: 5.9% (from 7.5%)

The Philippines is expected to improve slightly, with growth projected at 5.6% in 2026, up from 5.3% in 2025, mainly due to a low base after typhoon-related impacts in the third quarter of 2025, the NESDC said.