Decreased projected expansion for Asia and Pacific's economy, announced by ADB
The Asian Development Bank (ADB) has published its Asian Development Outlook (ADO) July 2025, revealing a slowdown in the economic growth of Asia and the Pacific due to the impact of US tariffs and global trade uncertainty.
The forecast for the region's GDP growth has been revised downwards, with a projection of 4.7% for 2025 and 4.6% for 2026. Rising US tariffs and broader trade uncertainties are key contributors to this slowdown.
US tariffs could shave approximately 0.4 percentage points from economic growth across the region, while deeper effects include a 0.7-point reduction in China’s growth and weaker global output by 0.8 points.
Southeast Asia faces the steepest growth impact, with growth now projected at 4.2% in 2025. The Pacific subregion’s growth is forecast at 3.9% in 2025 but falls to 3.5% in 2026, largely due to softer visitor arrivals which reduce tourism revenues.
Inflation across the region is expected to ease moderately to around 2.0% in 2025 and slightly rise to 2.1% in 2026, helped by stronger agricultural output and lower oil prices. However, renewed tariff escalations could add inflationary pressure in some countries while lowering global oil prices, leading to a complex, uneven inflation outlook.
Key risks beyond tariffs include escalating geopolitical tensions, disruptions in global supply chains, potential deterioration in China’s property market, and energy price shocks, which could further weaken regional growth prospects.
Country-specific forecasts reflect these dynamics. China’s growth is steady at about 4.7% in 2025 and 4.3% in 2026 partly due to stimulus offsetting export weakness. India, the region's second-largest economy, is forecast to grow by 6.5% this year and 6.7% next year, a decline from earlier projections.
India's growth forecasts have been revised downwards, with a projection of 6.5% this year and 6.7% next year. The forecast for next year has been lowered to 4.6% from 4.7%.
The ADB, a leading multilateral development bank supporting inclusive, resilient, and sustainable growth across Asia and the Pacific, has lowered its growth forecasts for economies in the region this year and next year.
In summary, the US tariffs and global trade uncertainty represent significant headwinds for the Asia-Pacific region’s economic growth in 2025-2026, slowing expansion, particularly in trade-dependent subregions and sectors, while inflation effects remain mixed depending on regional and commodity factors. Economies in Southeast Asia are expected to be hardest hit by worsened trade conditions and uncertainty.
In light of the ADB's latest report, additional scrutiny is needed in the finance sector, especially in businesses related to trade, as US tariffs and global trade uncertainty are predicted to affect the growth of Asian economies. In particular, Southeast Asian economies are projected to face a steeper decline in growth, making this region a prime focus for finance professionals.
