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APEC Lifts Growth Outlook as Trade Holds, AI Investment Surges
Issued by the APEC Policy Support UnitEconomic growth in the Asia-Pacific region is projected at 3.2 percent in 2025, with growth expected to hold at 3.1 percent in 2026, according to the latest APEC Regional Trends Analysis report, even as rising trade restrictions and policy uncertainty weigh on the medium-term outlook.
Growth is expected to slow to 2.9 percent in 2027 as structural constraints, trade fragmentation and geopolitical risks become more constraining.
The revised outlook marks an upward adjustment from earlier projections, pointing to stronger momentum through 2026 as consumption remains resilient and investment in technology-intensive sectors stays elevated.
“Near-term growth prospects have improved, supported by resilient demand, robust trade performance and strong AI-related investment,” said Carlos Kuriyama, Director of the APEC Policy Support Unit. “At the same time, rising trade restrictions and policy uncertainty are increasingly weighing on medium-term growth.”
Trade has held up better than expected despite global fragmentation. Merchandise trade volumes through the first three quarters of 2025 rose 8.0 percent for exports and 7.6 percent for imports from a year earlier, supported by strong demand from technology-intensive industries.
Policy headwinds are building, the report warned, as trade-restrictive measures rose sharply in 2025. This is driven by new tariff and non-tariff actions that outpaced trade-facilitating initiatives and raised costs and uncertainty for businesses.
“Firms have adapted quickly to changing trade conditions, helping sustain trade volumes,” said Rhea C. Hernando, an analyst with the APEC Policy Support Unit. “But the proliferation of trade restrictions is making these adjustments more costly and complex.”
Trade in commercial services continued to expand, though growth slowed from 2024’s rapid rebound as travel services eased from earlier double-digit growth rates, partly offset by steadier expansion in transport and other commercial services.
Inflation across most Asia-Pacific economies continued to ease in 2025, with average inflation estimated at around 2.4 percent, down from 2.6 percent in 2024, reflecting lower energy prices, moderating food costs and improved supply conditions.
“Easing inflation has given central banks greater policy space to support growth,” said Glacer Niño A. Vasquez, a researcher with the APEC Policy Support Unit. “But risks remain, particularly from renewed trade restrictions and geopolitical shocks.”
“Current-account imbalances across the region have widened since the pandemic, increasing exposure to external shocks and financial volatility as surpluses grow larger and deficits deepen,” Kuriyama added.
Record-high semiconductor sales driven by AI demand are lifting productivity, but investment is increasingly concentrated, raising risks around market concentration, supply-chain exposure and the durability of expected returns.
The report suggests that APEC member economies reinforce policy credibility, align AI investment with workforce upgrading, and deepen regulatory coordination to sustain growth and reduce uncertainty as global economic fragmentation persists.
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Minister Wang Yi to Senior Officials: Build Asia-Pacific Community
Issued by the APEC Senior Officials’ MeetingSenior officials from across the Asia-Pacific concluded the first meeting cluster of 2026 in Guangzhou on Tuesday, as China formally opened its APEC host year with a renewed emphasis on openness, innovation and cooperation at a time of rising economic uncertainty.
Opening the First APEC Senior Officials’ Meeting, Chinese Foreign Minister Wang Yi said the international environment had entered a more volatile phase, posing growing challenges to economic growth and regional integration. Against this backdrop, he noted that “China fully recognizes that our third time as APEC host carries with it significant responsibilities as well as a glorious mission”.
“The success of the Asia-Pacific owes much to the stable environment we have collectively safeguarded and to our ability to align with the broader trend of economic globalization,” Minister Wang said.
“We should follow the ‘APEC way’ by building consensus through consultation, handling differences properly and keeping regional cooperation on the right track,” he added.
Minister Wang underscored that openness is the lifeblood of APEC economies, noting that the vast landmass and the expansive ocean offer limitless space for economic cooperation.
“We should strengthen macroeconomic policy coordination, uphold open regionalism, advance trade and investment liberalization and facilitation” he said. “We should safeguard the WTO-centered multilateral trading system, leverage the guiding role of trade arrangements, foster greater connectivity among various regional free trade agreements and gather momentum toward a Free Trade Area of the Asia-Pacific (FTAAP).”
Senior officials reviewed early-year work across more than 20 APEC committees and working groups, covering trade and investment, finance, digital policy, structural reform and economic and technical cooperation.
Discussions focused on translating shared priorities into practical outcomes, including promoting regional economic integration, strengthening supply chain resilience, facilitating cross-border flows and supporting the multilateral trading system.
Innovation featured as a second major pillar of this year’s agenda. Officials examined ways to accelerate digital transformation, deepen cooperation on artificial intelligence and emerging technologies, and strengthen digital infrastructure and skills so that innovation-driven growth delivers broader and more inclusive benefits across economies.
Cooperation to support sustainable and inclusive development formed the third pillar of discussions, with work planned across a wide range of areas, including energy, food security, public health, small and medium-sized enterprises, women’s economic participation, population aging, anti-corruption and environmental challenges.
Minister Wang also emphasized the need for growth that is both beneficial and inclusive, noting that economic development should not come at the expense of leaving anyone behind or environmental integrity.
“We should strengthen economic and technological cooperation, scale up support for developing economies and ensure emerging technologies like artificial intelligence, benefit more people. We should put people first so that small businesses and vulnerable communities can share more in the fruits of development,” he said. “We must also promote green and low-carbon growth so that the Asia-Pacific advances along a path of long-term sustainability.”
Reflecting on the conclusion of the first meeting cluster, Ambassador Chen Xu, Chair of the APEC 2026 Senior Officials’ Meeting, said the Guangzhou meetings had laid a strong foundation for the year ahead.
“The senior officials’ meeting here will be the curtain raiser for the APEC China year,” Ambassador Chen said. “I’m confident that APEC China year will bring fresh momentum to the building of an Asia-Pacific community and inject new vitality to the development of our region.”
Senior officials’ meetings will continue later this year in Shanghai and Dalian, alongside a series of sectoral ministerial meetings leading up to the APEC Economic Leaders’ Meeting in November.
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media@apec.org
APEC Gains Momentum Amid Rising Risks: Can It Last?
By Rhea Crisologo Hernando, Glacer Niño A. Vasquez and Carlos Kuriyama
The February 2026 edition of the APEC Regional Trends Analysis (ARTA) points to a cautiously improved outlook for the Asia‑Pacific region. Growth momentum has strengthened, supported by resilient consumption, robust trade performance and a surge in AI‑related investment. Yet even as near-term prospects brighten, the report underscores that underlying vulnerabilities are deepening, leaving policymakers with the challenge of sustaining momentum while managing rising medium‑term risks.
A strengthening growth picture
Recent data indicate that the APEC region expanded by 3.4 percent in the first three quarters of 2025, with full-year growth estimated at 3.2 percent, slightly above the October 2025 ARTA projection. This upside reflects stronger-than-anticipated performance in consumption, trade, and investment, particularly in technology-intensive sectors.
APEC growth is projected at about 3.1 percent in 2026, broadly stable and modestly revised upward compared with the earlier forecast of 2.9 percent. This resilience stands out against a backdrop of persistent global uncertainty, highlighting the region’s capacity to adapt through flexible supply chains, diversified markets, and continued innovation.
Several factors underpin this improved outlook. Household demand has held up well across much of the region as cost-of-living pressures ease. Trade activity remains robust despite rising protectionism, as firms are rerouting trade flows, adjusting sourcing strategies and diversifying markets. At the same time, massive AI‑related and digital investments are supporting aggregate demand while boosting productivity.
However, large-scale AI investments also raise concerns about concentration and profitability issues, which, combined with prolonged uncertainty and renewed trade protectionism, could heighten medium-term risks and lead to a deceleration in APEC growth, currently projected to slow to 2.9 percent in 2027.
Policy space widens as inflation eases
Inflation has continued to ease across most APEC economies. Average inflation in 2025 is estimated at around 2.4 percent, lower than the 2.6 percent recorded in 2024, reflecting softer energy and food prices. Oil prices have declined amid ample supply and rebuilding inventories, while food prices have moderated as agricultural output improved.
This benign inflation environment has allowed many central banks to maintain accommodative or neutral policy stances, supporting domestic demand and investment. Importantly, inflation expectations remain broadly anchored, reinforcing policy credibility. That said, risks to price stability persist, particularly from potential supply shocks, renewed trade restrictions, or geopolitical issues. Preserving strong institutions and prudential oversight remain critical to maintaining confidence as monetary conditions gradually normalize.
Trade resilience amid fragmentation
Trade performance exceeds expectations. Merchandise trade volume doubled through the first three quarters of 2025 to 8.0 percent for exports and 7.6 percent for imports compared with 2024, supported by agile business responses to shifting trade routes and sustained demand from technology‑intensive industries.
Intra‑Asia trade has strengthened, reflecting deeper regional integration, while extra‑regional trade has also improved, signaling resilient external demand.
Commercial services trade continues to expand, though at a softer pace than in 2024’s rapid rebound. Travel services, in particular, eased from earlier double‑digit growth rates, while transport and other commercial services provided steadier support.
However, these positive trade dynamics coexist with a less favorable policy environment. Trade‑restrictive measures rose sharply in 2025, driven by new tariff and non‑tariff actions. Although economies continue to implement trade‑facilitating measures, these have been outweighed by new restrictions, intensifying medium‑term headwinds. Trade policy uncertainty remains elevated, weighing on business sentiment and investment planning.
Current account surpluses and deficits have remained persistent across APEC economies and have widened since the early 2020s. These trends reflect structural trade imbalances shaped by differences in savings, investment, competitiveness and domestic demand. While such imbalances can coexist with growth, prolonged surpluses or deficits heighten exposure to external shocks and financial volatility. Strengthening domestic demand and productive investment in surplus economies, while improving competitiveness, export diversification and savings rates in deficit economies, can help sustain growth and reduce imbalance-related risks.
Technology investment: opportunity with risks
One defining feature of the current cycle is the scale of investment in AI and digital technologies. Global semiconductor billings hit record highs in 2025, driven largely by AI‑related demand. These investments could boost productivity and support longer‑term growth across the region.
At the same time, risks are emerging. Investment has become increasingly concentrated in a narrow set of technologies and sectors, raising exposure to supply‑chain disruptions, geopolitical risks, and the possibility that returns may fall short of expectations. A lopsided investment pattern, over‑reliant on AI as the primary engine of productivity, could increase economic vulnerability if efforts to bridge the digital divide and upgrade digital skills fail to keep pace.
Downside risks and upside opportunities
Despite stronger near‑term momentum, downside risks remain considerable. Geopolitical tensions and geoeconomic fragmentation continue to threaten supply chains and the rules‑based trading system. Prolonged policy uncertainty risks delaying private investment and slowing productivity gains.
Nonetheless, there are notable upside opportunities. The private sector has repeatedly shown adaptability, allowing trade and production networks to reconfigure quickly. Faster‑than‑expected productivity gains from AI, particularly if adoption spread beyond frontier firms, could lift potential growth sooner than assumed. A more synchronized easing of monetary policy, especially among advanced economies, could further support global demand and financial conditions.
Against this backdrop, the ARTA points to three broad policy priorities for APEC economies:
- Reinforcing credible economic management. Easing inflation provides room to support growth, but credibility is critical. Clear policy frameworks and effective prudential oversight help anchor expectations and reduce uncertainty. Strong institutions matter to ensure coherent, credible and market-friendly policies. Effective institutions are key to coordinating policy, managing risks and adapting while preserving trust.
- Promoting inclusive, productivity‑enhancing reform. AI‑driven investment should be paired with broader reforms such as sustained investment in skills development, labor mobility, competitive market structure and reliable infrastructure. Broadening the base of productivity gains that ensures technological progress translates into durable and inclusive growth.
- Strengthening adaptive regional cooperation. In a fragmented global environment, regional platforms matter more than ever. Deeper policy coordination, better information sharing and institutional agility can stabilize expectations and counter rising uncertainty. APEC’s role in reinforcing predictability, rebuilding confidence, fostering cooperation and anchoring stability across the region remains vital.
The February 2026 ARTA shows that near‑term growth momentum in APEC has improved, but this is not the time to be complacent. Sustaining current gains will require policies that balance support for demand with reforms that raise productivity and resilience. By leveraging its diversity, adaptability and cooperative frameworks, the APEC region is well-positioned to navigate global transitions, provided that policymakers act decisively to manage risks while seizing emerging opportunities.
Rhea Crisologo Hernando is analyst, Glacer Niño A. Vasquez is researcher, and Carlos Kuriyama is director at the APEC Policy Support Unit.
For more on this topic, download the latest APEC Regional Trends Analysis report.
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This news release can also be viewed on the APEC website: https://www.apec.org/press/
