KUALA LUMPUR: Moody’s Analytics expects growth across the Asia-Pacific region to moderate to 4.2 per cent this year from 4.3 per cent in 2025, before slowing further to 3.6 per cent next year, as higher prices and tighter policy weigh on demand.
It said that currently, the Asia-Pacific economy is running at two different speeds.
"The artificial intelligence (AI) boom has helped the region dodge a sharper slowdown. But headwinds to growth keep mounting," it said in a research note today.
The research firm said the AI boom is fuelling the region’s export engine, with hot demand for semiconductors and other tech products driving shipments across Taiwan, South Korea, China and parts of Southeast Asia, offsetting weakness elsewhere.
It noted that in the first half of this year, nominal goods exports from South Korea and Taiwan surpassed Japan’s for the first time.
Meanwhile, geopolitical and trade shocks continued to elevate prices, with the conflict in West Asia grinding on, the Strait of Hormuz still closed, and fresh United States import tariffs biting, it said.
Moody’s Analytics added that central banks are tightening only modestly, with the possibility of going even further if the conflict drags on and oil prices stay high.
"Higher inflation strengthens the case for tighter monetary policy, especially where the AI boom has left growth hot and asset prices stretched. But the trade-offs facing central banks are difficult.
"Higher interest rates curb inflation by cooling demand. That approach worked when post-pandemic demand was running hot, but it is far less effective now, with demand already weak and rates still high across much of the region. As a result, central banks have tightened policy only modestly this year," it added.
Nevertheless, the firm believes that the conflict in West Asia will eventually wind down, and thus the spike in inflation should prove temporary. - Bernama
