APEC faces mounting debt and weakening trade, GDP growth to slow to 2.9% in 2026

The Asia-Pacific Economic Cooperation (APEC), comprising 21 member economies across the region, remains a key platform shaping the future trajectory of global trade and growth — including for Thailand.

Carlos Kuriyama, Director of the Policy Support Unit at the APEC Secretariat, said in the latest APEC Regional Trends Analysis that the bloc’s economy is projected to expand by 3.1% in 2025, slightly higher than the earlier estimate of 3.0%, driven by stronger trade activity and rising demand for high-tech products.

However, growth is expected to moderate to 2.9% in 2026 due to mounting public debt, weaker trade flows, and fading temporary growth factors such as advance exports and inventory accumulation to hedge against trade restrictions.

“The APEC economy — especially the business sector — has shown remarkable adaptability to shifting trade and policy conditions. Yet this resilience is being tested as temporary stimuli fade and structural pressures such as rising debt and slowing trade start to bite,” Kuriyama said.

Public debt to exceed 110% of GDP

The report warned that public finances are under strain across the region. Central government debt in APEC is projected to exceed 110% of GDP by 2026 — a sharp rise from previous estimates — reflecting pandemic-related expenditures, slower revenue recovery, and increased social spending in ageing societies.

Researcher Glacer Niño A. Vasquez noted that trade momentum in 2025 remained solid, partly due to firms front-loading exports ahead of new trade restrictions. Export growth, however, is expected to slow to 1.1% in 2026 as those temporary drivers unwind amid persistent trade tensions.

Co-author Rhea C. Hernando added that rising debt levels are eroding fiscal space just as economies must invest in innovation, infrastructure, and human capital. “Fiscal reforms that strengthen frameworks and improve public spending efficiency are increasingly essential to ensure future resilience,” she said.

Low inflation offers some relief

APEC’s average inflation rate stood at 2.2% in the third quarter of 2025, supported by improved supply conditions and stable commodity prices. The relatively moderate inflation gives central banks some room to ease policy and stimulate growth, though careful balance remains vital to prevent renewed price pressures.

The report underscored that sustained regional cooperation remains the cornerstone of economic stability. As trade tensions intensify and uncertainty persists, transparent policymaking and open dialogue will be critical in restoring confidence and sustaining growth.

“APEC must walk a fine line between safeguarding stability and pursuing bold reforms to strengthen resilience,” Kuriyama said. “Adaptive regional cooperation — providing a platform for open dialogue and shared solutions — is where APEC’s true strength lies.”

Private sector urges stronger cooperation

On the sidelines, the APEC Business Advisory Council (ABAC) called for unity under the theme “Bridge, Business, Beyond.” ABAC Chair Kyuho Lee stressed that in an era of unprecedented uncertainty, it is crucial to bridge divides, empower businesses, and build conditions for shared prosperity.

ABAC proposed 41 actionable recommendations for APEC leaders across five key areas:

• Trade: uphold a rules-based multilateral trading system, accelerate progress towards the Free Trade Area of the Asia-Pacific (FTAAP), promote inclusive trade for women and under-represented groups, and enhance digital and paperless trade systems.
• Sustainability: advance realistic, inclusive energy transition plans; adopt green trade frameworks; and strengthen circular, low-carbon supply chains.
• Digital and AI innovation: ensure equitable access to secure digital infrastructure, promote responsible AI governance, and harmonise digital trade regulations.
• Finance and economics: mobilise up to US$2.5 trillion annually to close investment gaps in energy transition, digital infrastructure, and disaster resilience, while ensuring predictable fiscal policies.
• Health and bioeconomy: expand equitable access to healthcare, facilitate health-data sharing, and harness technologies such as genomics and AI to address demographic challenges.

ABAC emphasised that only through deeper regional cooperation, transparent policymaking, and sustained reform can APEC economies maintain competitiveness and inclusive growth amid mounting global headwinds.