Asia-Pacific’s economic growth is expected to hold up in 2026, supported by resilient domestic demand in many economies and a tentative thaw in US-China ties, according to a report published by S&P Global Ratings.
The credit rating agency sees limited scope for further interest rate cuts across the region as policy rates approach neutral levels and currencies remain under pressure.
Asia-Pacific central banks have already lowered policy rates by an average 65 basis points in 2025, following a 40-basis-point average cut in 2024.
S&P Global Ratings Asia-Pacific chief economist Louis Kuijs noted that higher trade restrictions and industrial policy are expected to weigh on trade, investment and growth in the coming years.
The report, titled “Economic Outlook Asia-Pacific Q1 2026: Signs of Relief,” raised the 2026 GDP growth forecast for China to 4.4 percent from 4 percent, citing lower US tariffs as the main factor. However, China’s domestic demand is expected to remain subdued and exports should slow, it said.
For the rest of Asia-Pacific (excluding China), S&P Global Ratings revised up the 2025 GDP growth forecast by 0.2 percentage points to 4.4 percent and the 2026 forecast by 0.2 percentage points to 4.2 percent.
The adjustment was based on an improved outlook for tech exports and a relatively favorable outcome from the US-China negotiations, even as a broader slowdown stemming from US tariffs and slower global growth is still anticipated.
In the United States, tariffs are causing inflation to rise while unemployment remains low, although economic growth and job creation have softened, it said.
S&P Global Ratings expects the US Federal Reserve to stage three more 25 basis point rate cuts through the end of 2026, taking the rate to 3 percent to 3.25 percent.
