- China: a fresh growth cycle with focus on tech autonomy.
- Singapore: Drag from tariff to be cushioned by tech and climate investments.
- India: Shift in strategy toward domestic demand-led growth.
- Indonesia: Growth to be propped up sizeable policy push.
- Taiwan: A tale of two economies—surging AI and lacklustre rest.
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Commentary: Themes from Annual Outlook
We published our annual outlook publication last week. The process of preparing the publication, containing country write-ups of 14 economies and market outlook on 7 asset classes, entailed a sense of modest relief. A year that began with unprecedented fear about global trade and multilateral rules-based order is ending with proof of passing stress tests. As the US turns inward and pursues coercive diplomacy, the rest of the world is adjusting with deals and strategies. This entails going on separate paths; one with the US and one with others. As separate paths are charted, investment flows get recalibrated. The likes of Malaysia, Singapore, and Vietnam are already seeing record FDI; we see more potential in 2026 and beyond. Monetary conditions are constructive; food and fuel inflation not an issue. The region is stepping into the new year with reduced anxiety. Having faced numerous stress tests since the pandemic, governments and firms appear to be in better shape to deal with disruption, be it economic, geopolitical, or digital. We expect Asia and Asean growth to be only marginally lower in 2026.
China: 2026 marks the start of a new growth cycle. At the first year of the 15th Five-Year Plan, fixed asset investment will lean on manufacturing, reflecting push for technological autonomy.
India: Shift in strategy to strengthen domestic pillars continues. Post one-time boost from lower GST rates, focus will shift to domestic drivers to sustain this momentum in 2026.
Singapore: Exposed to increased geoeconomic fragmentation, rapid technological advancement, and climate change. The economy will face a visible trade drag from the lagged impact of higher US tariffs. This will be cushioned by tech investments and adoption, alongside supportive financial conditions.
Indonesia: We revise up 2026 growth to 5.2%yoy as fiscal and monetary policies are geared to be growth supportive.
Taiwan: Tech exports should remain strong thanks to the ongoing global AI race, though growth will likely moderate. In contrast, non-tech exports are expected to remain weak, posting continued negative growth due to persistent US tariff pressures and sluggish domestic demand in China.
US: After proving to be stronger than feared earlier this year, the US is stepping into 2026 with little fear of recession, but with a wider set of concerns about cyclical strength and erosion of institutional integrity. The best times may well be behind.
Risks: US financial sector poses the greatest risk for 2026, and it’s not just about AI valuations and their lopsided weight on the equity markets. We worry that both the private credit and private equity could spring negative surprises, impacting credit performance. Fed credibility erosion in response to political meddling is a major concern. This could be compounded even further if the Treasury begins to take measures to support the US debt market through financial repression. Light touch regulation on a variety of aspects of the financial sector, ranging from digital assets to the banking system could be potentially destabilising, in our view. Our base case of steady growth would unravel if financial markets begin to turn sour.
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