DBS analysts have released a positive economic outlook for Asia in 2026, predicting that the region’s currencies will regain stability and economic growth will only be marginally lower. This optimism is due to the US trade restrictions not being as severe as initially anticipated, allowing countries to adapt and find alternative trade paths. As a result, countries such as Malaysia, Singapore, and Vietnam are experiencing record foreign direct investment. The report notes that while the US tariffs have had some impact, they have not drastically affected demand from US consumers, and most Asian countries have actually increased exports to the US.
The US shift away from multilateralism has led to increased engagement between other countries, with new deals being made in areas such as cybersecurity, climate tech, and cross-border payment. The report highlights that the Malaysian ringgit and Thai baht are likely to benefit from interest rate cuts in the US next year. Regional equity markets are expected to be driven by country-specific factors and accommodative monetary policies, with initiatives in Singapore and the Philippines helping to mitigate external uncertainties.
For Singapore specifically, DBS anticipates a slower GDP growth rate of 1.8% in 2026 due to the lagged impact of US tariffs, but expects this to be offset by tech investments and supportive financial conditions. Inflation is predicted to remain below 2%, with the Monetary Authority of Singapore expected to maintain a cautious stance. The Singapore equity market is expected to experience gentler gains in 2026, with the construction sector projected to outperform due to major transport investments and housing development.
Overall, the report suggests that Asia has passed the test of resilience in the face of global trade uncertainty and is poised for stability and growth in 2026. The region’s ability to adapt and find alternative trade paths has helped to mitigate the impact of US tariffs, and country-specific drivers and accommodative monetary policies are expected to support equity markets. As the global economy continues to evolve, Asia is likely to play an increasingly important role, with countries such as Singapore, Malaysia, and Vietnam at the forefront of this growth.