Asian economies are expected to remain resilient in 2027, with strategic capital investment likely to underpin economic activity. However, gaps in domestic value added arising from intra-regional trade, rising capital costs and the withdrawal of policy support are cited as factors that will determine the resilience of the recovery.
Real GDP growth across 12 major Asian economies is said to have remained strong in 2026, but is expected to slow by 0.4 percentage points to 4.2% in 2027. Global technology demand and strategic domestic investment are expected to continue supporting economic activity, although the momentum of new growth drivers may ease.
Our economists analyse that Asia’s capital investment cycle will remain more resilient than market expectations, despite rising capital costs and reduced policy support. However, some have pointed out that intra-regional trade may result in low domestic value added, making it necessary to examine the nature of that trade closely.
One consideration is that large-scale investment in strategic sectors is accompanied by high import dependence and physical bottlenecks, meaning that its multiplier effects on domestic employment and income are likely to be limited. China’s investment growth may also undershoot expectations if the property market adjustment is prolonged.
The second consideration is the withdrawal of policy support and weak household consumption. As the effects of fuel subsidies and cash transfers fade, consumer sentiment may become more cautious depending on employment trends and wages, potentially affecting the pace of the recovery in regional demand.