The Asia-Pacific region is poised for slightly faster growth this year, but the momentum is expected to weaken in 2026 as trade headwinds and rising public debt weigh on the region’s outlook, according to a new report released by the Asia-Pacific Economic Cooperation (APEC).

In its latest APEC Regional Trends Analysis report for October 2025, the regional grouping’s policy support unit (PSU) raised its 2025 growth forecast to 3.1 percent from an earlier estimate of three percent, citing resilient trade activity and strong demand for high-tech goods.

However, the report warned that expansion will likely slow to 2.9 percent in 2026 as temporary growth drivers fade, trade restrictions deepen, and debt levels surge.

“APEC economies, particularly businesses, have demonstrated remarkable agility in responding to shifting trade and policy conditions. But this resilience is being tested as the boost from temporary factors fade and deeper structural pressures, like rising debt and slowing trade, begin to take hold,” Carlos Kuriyama, APEC PSU director, said in a statement on Thursday, Oct. 30.

Kuriyama noted that while the number of trade-facilitating measures is increasing, “the combined effect of rising trade-restrictive measures and trade remedies now points to deepening trade frictions.”

Goods trade among APEC’s 21 member economies, which include the Philippines, remained robust in the first half of 2025, with exports rising 6.5 percent and imports up 6.1 percent in value terms, the statement noted. Export and import volumes also grew 8.8 percent and 8.5 percent, respectively.

“Trade momentum this year has been encouraging, but much was driven in part by businesses rushing to export before new restrictions could take effect,” according to Glacer Niño A. Vasquez, APEC PSU researcher and co-author of the report. “Goods export growth is expected to slow to around 1.1 percent next year, as these transitory factors wane and trade tensions persist.”

The report also flagged mounting fiscal constraints in APEC economies, with general government (GG) gross debt projected to exceed 110 percent of GDP by 2026—higher than earlier forecasts. The increase reflects lingering Covid-19 pandemic-related spending, slower revenue recovery, and rising costs to support aging populations.

“Rising debt is eroding fiscal space just as economies need to invest in innovation, infrastructure and human capital, especially as aging populations require higher spending on health, pensions and social services,” said Rhea C. Hernando, APEC PSU analyst and co-author of the report. “Reforms that strengthen fiscal frameworks and improve public spending efficiency are increasingly necessary to adequately respond to future shocks.”

Inflation across APEC, meanwhile, has continued to moderate—averaging 2.2 percent in the third quarter of 2025—thanks to stable commodity prices and improved supply conditions. The report said this gives central banks some room to ease monetary policy, though it emphasized the need to balance growth support with price stability.

Despite these challenges, the report underscored the importance of regional cooperation to safeguard economic stability.

“APEC must navigate a delicate path that preserves economic stability while advancing bold reforms to strengthen resilience. An adaptive regional cooperation is essential, and this is where APEC plays a vital role: by providing a platform for open dialogue and shared solutions that promote predictable and transparent frameworks to foster trade and investment,” Kuriyama said.