Economic growth across the Asia-Pacific Economic Cooperation (APEC) region is expected to ease to 3.2 percent this year despite a surge in technology-related trade and investment, as accelerating inflation, higher energy costs, geopolitical tensions, and trade policy uncertainty cloud the outlook.

In its latest APEC Regional Trends Analysis published on Thursday, Aug. 27, APEC’s Policy Support Unit (PSU) said regional growth would moderate from 3.3 percent in 2025 before slowing further to three percent in 2027.

Growth forecasts were upgraded for five APEC economies and downgraded for six, while projections for 10 economies were maintained, leaving the region’s overall 2026 growth forecast unchanged.

“APEC continues to grow despite a much more difficult external environment, with technology investment, trade and digital services providing important support to the regional economy,” APEC PSU director Carlos Kuriyama said.

“But the sources of growth are becoming more concentrated while risks are coming from several directions at once. Higher energy costs, geopolitical and trade policy uncertainty, aggravated by weather-related disruptions could all dampen consumption and investment. Economies need to strengthen other sources of growth while making the most of the current technology-driven momentum,” Kuriyama added.

Trade emerged as a major source of support, with merchandise exports by value surging 18.8 percent year-on-year in the first quarter, significantly faster than the 5.1-percent increase recorded in the same period in 2025.

Merchandise imports climbed 10.2 percent, compared with 7.9-percent growth a year ago, while export and import volumes expanded by 10.8 percent and 11.1 percent, respectively, amid strong demand for technology products.

However, stronger trade is being accompanied by renewed price pressures, with APEC inflation forecast to accelerate to 2.9 percent this year from 2.4 percent in 2025 before easing to 2.5 percent in 2027.

Higher food and transportation costs are expected to drive the acceleration, while increased fuel and insurance costs and tight shipping capacity have pushed up freight rates on several intra-Asia and long-haul routes.

“Central banks are facing renewed price pressures at a time when economic growth is expected to moderate,” APEC PSU analyst Rhea Crisologo Hernando said.

“The challenge is to keep inflation expectations anchored without unnecessarily constraining economic activity, particularly when price pressures are coming from external supply shocks. The persistence and scale of these pressures will be important in determining the appropriate monetary policy response,” she added.

Still, some pressures on regional trade have eased. The Global Supply Chain Pressure Index dropped by 56.5 percent between April and July, while the Trade Policy Uncertainty Index declined to 183.8 points from an average of 543 points in 2025.

Investment has also become increasingly concentrated in technology and energy, with information and communications, electronics, and energy accounting for 57.6 percent of global greenfield investment in 2025, nearly 10 percentage points (ppts) more than five years ago. Foreign direct investment (FDI) in APEC, meanwhile, remained broadly stable.

Aside from energy and geopolitical risks, APEC flagged an intensifying El Niño as another threat to the region’s outlook, as drought, heat stress, and flooding could reduce agricultural production and further drive up food prices.

Supplies of major agricultural commodities remain broadly adequate, although balances are tightening for milled rice, oilseeds, and vegetable oils.

“The economic risks we are tracking are increasingly interconnected,” APEC PSU researcher Eldo Simanjuntak said.

“A weather shock can affect agricultural production and food prices, while energy and shipping costs can feed through to businesses and consumers. Strengthening supply chains, food security and productive investment will be critical to keeping these shocks from becoming a broader drag on growth,” he added.

APEC called for greater investment in digital infrastructure and connectivity, stronger supply chains, more resilient agriculture and early warning systems, and improvements to the investment environment to support longer-term economic growth.