Economic Growth Outlook for Asia-Pacific in 2025

Economic growth in the Asia-Pacific region is likely to face challenges in 2025 due to potential U.S. tariff increases, a strong dollar, and weaker export demand, according to UBS analysts in a research note.

Regional Slowdown

UBS economists forecast a regional slowdown of 0.5 to 1 percentage point in real GDP growth, with much of the impact expected in the second half of the year as trade barriers tighten and U.S.-China tensions escalate.

Impact on Exporters

Cyclical exporters like South Korea and Taiwan are likely to experience a more pronounced slowdown, whereas domestically oriented economies such as India and the Philippines should show greater resilience.

China’s Response

Mainland China, a focal point of U.S. tariff strategies, is expected to implement extensive fiscal and monetary measures to mitigate the negative effects of trade barriers and property sector challenges. UBS projects China’s 2025 growth to stabilize at mid-4%, supported by fiscal packages ranging from RMB 2 to 4 trillion targeting local debt resolution, property inventory reductions, and bank recapitalization.

Monetary Easing

While monetary easing is underway, with 50 to 100 basis points of reserve requirement ratio cuts and further policy rate reductions, the challenges posed by higher tariffs could weigh on near-term growth prospects.

Southeast Asia Policy Shifts

Economies in Southeast Asia are likely to see policy shifts aimed at maintaining growth momentum. UBS anticipates rate cuts across India, Indonesia, and the Philippines, while countries like Malaysia and Taiwan might hold steady amid currency and trade concerns.

Investment Preferences

Despite economic strain, UBS prefers investment in high-quality investment-grade Asian credits, citing stronger fundamentals and lower volatility compared to high-yield options. They advise positioning in short- to medium-duration bonds (average duration of five years) to limit downside volatility from higher long-end rates.