Asia Pacific’s Economic Growth to Hold Steady in 2025

Asia Pacific’s economic growth is expected to hold steady, with India as the fastest-growing economy, thanks to its GDP growth of 6.6 percent and consumer spending growth of 6.2 percent, fuelled by a rising middle class and investment.

“If 2024 was about ‘getting back to normal,’ 2025 is about normalization as volatility subsides and easing monetary policy allows consumers to benefit from economic growth,” said David Mann, Asia Pacific chief economist at Mastercard Economics Institute (MEI).

“However, policy decisions like potential interest rate rises in Japan or U.S. tariffs could significantly impact this growth. Businesses should leverage consumer optimism while preparing for potential trade disruptions.”

Similarly, the Asian Development Bank (ADB) expects the region’s growth to remain steady this year and in 2025 but said that the incoming administration of U.S. President-elect Donald Trump may affect the region’s longer term outlook.

ADB forecasts that developing economies in Asia Pacific will grow by 4.9 percent this year, lower than the earlier forecast of 5 percent. ADB also lowered the inflation outlook to  2.7 percent from 2.8 percent, citing an anticipated moderation in oil prices.

“Strong overall domestic demand and exports continue to drive economic expansion in our region,” said Albert Park, chief economist at ADB.

“However, the policies expected to be implemented by the new U.S. administration could slow growth and boost inflation to some extent in the People’s Republic of China, most likely after next year, also impacting other economies in Asia and the Pacific.”

Australia to See Relief in 2025

Meanwhile, MEI said that Australia, New Zealand, and Singapore are likely to see relief in 2025 after experiencing stronger inflation shocks than the rest of Asia Pacific countries.

The MEI attributed the forecast to inflation levels in these countries already falling to about 2 percent to 3 percent and central banks easing their respective monetary policies.

Earlier, investment bank Morgan Stanley said its economists expect Australia’s economy to improve gradually next year but that its economic growth will still remain below trend.

“While households’ real incomes are likely to increase due to lower taxes and inflation, we anticipate only a modest impact on spending as consumers remain cautious,” said Alexandre Ventelon, head of wealth management research at Stanley.

“Savings rates are expected to rise slightly as house prices stabilise and household wealth flattens.”

Ventelon added that government spending will remain as Australia’s key growth driver in the near term until the federal election in May, after which an interest rate cut is expected.

“This is projected to be followed by two more rate cuts in August and November, bringing the cash rate down to 3.60 percent and close to the Reserve Bank of Australia’s neutral rate estimate.”