GDP Growth Across Asia-pacific Region Expected To Slow To 3.7 Pct This Year -- Moody's Analytics

KUALA LUMPUR, Feb 19 (Bernama) -- Gross domestic product (GDP) growth across the Asia-Pacific (APAC) region is expected to slow to 3.7 per cent in 2025 from an estimated 3.9 per cent in 2024 on trade tensions, policy shifts and uneven recoveries.

Moody’s Analytics said growth across the region will slow as new tariffs and softening global demand weigh on exports.

“Just weeks into Donald Trump’s second term as US President, Washington unleashed a barrage of tariffs targeting friends and foes, including a 10 per cent tariff on Chinese goods and a sweeping 25 per cent duty on all US steel and aluminium imports.

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“Anticipated tariffs on cars pose a particular threat to Japan and South Korea,” it said in a note today.

It said China will bear the brunt of escalating trade tensions with the US while high-income economies such as Japan and Australia, will see modest improvements in 2025 as inflation recedes.

Moody’s Analytics said APAC will feel the sting of these tariffs more than most, given the region's deep reliance on trade.

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“Economies in Northeast and Southeast Asia, in particular, have long relied on exports as a main driver of growth – exports that, one way or the other, end up in the US.

“Compared with pre-pandemic trends, exports of goods and services are either matching or exceeding the global average,” it said.

It said inflation has moderated across much of the region, allowing central banks to ease monetary policy settings. But fresh currency depreciation and sticky inflation could limit the scope for further cuts.

“Most APAC central banks have followed the US Fed’s lead on rate cuts to avoid sharp currency depreciation.

“But Malaysia and Taiwan have yet to move, while the Bank of Japan has bucked the trend entirely, raising rates despite a struggling economy,” it said.

Moody’s Analytics opined the exchange rates will stay in the spotlight as the US Federal Reserve (Fed) slows its easing pace this year.

“Sticky inflation and the economic policies announced by Trump point to fewer rate cuts than previously expected.

“This has strengthened the US dollar and weakened currencies across APAC,” he said.

Meanwhile it said uncertainty is also weighing on foreign direct investment (FDI) flows.

“Global FDI has been shrinking for years, weighed down by regulatory changes, pandemic-era disruptions, inflation and tighter credit conditions.

“While industrial policies and efforts to diversify supply chains have created isolated opportunities for some countries and industries, they introduce friction that deters cross-border investment,” it said, adding that this is particularly worrisome for Vietnam and Malaysia, where FDI has fuelled growth.

-- BERNAMA