Asia-Pacific economies are set to post slower growth over the next two years, with expansion projected to ease in 2026 and decelerate further in 2027 from 2025 levels, signaling a gradual loss of momentum across the region.

According to the February 2026 Asia-Pacific Economic Cooperation’s (APEC) Regional Trends Analysis (ARTA) report released on Tuesday, Feb. 10, regional growth is expected to slip from 3.2 percent in 2025 to 3.1 percent in 2026 and further to 2.9 percent in 2027. The Philippines is among APEC’s 21 member economies.

The report said the revised outlook reflects an upward adjustment from earlier projections, indicating firmer momentum through 2026 as resilient consumption and sustained investment in technology-intensive industries support growth.

However, APEC warned that by 2027, structural constraints, rising trade fragmentation, and geopolitical risks are expected to weigh more heavily on the region’s economic expansion.

“Near-term growth prospects have improved, supported by resilient demand, robust trade performance, and strong artificial intelligence (AI)-related investment,” said APEC policy support unit (PSU) director Carlos Kuriyama. “At the same time, rising trade restrictions and policy uncertainty are increasingly weighing on medium-term growth.”

Trade has proven more resilient than expected despite rising global fragmentation. The APEC report said merchandise trade volumes in the first three quarters of 2025 grew by eight percent for exports and 7.6 percent for imports year-on-year, driven largely by robust demand from technology-intensive industries.

Despite the trade gains, policy headwinds are mounting, the report warned, as trade-restrictive measures surged in 2025. New tariff and non-tariff actions outpaced trade-facilitating initiatives, raising costs and uncertainty for businesses.

“Firms have adapted quickly to changing trade conditions, helping sustain trade volumes,” said APEC PSU analyst Rhea C. Hernando. “But the proliferation of trade restrictions is making these adjustments more costly and complex.”

The report noted that trade in commercial services continued to grow, though at a slower pace than 2024’s strong rebound. Growth in travel services eased from earlier double-digit rates, partly offset by steadier gains in transport and other commercial services.

On inflation, APEC said price pressures across most Asia-Pacific economies continued to ease in 2025, with average inflation estimated at about 2.4 percent, down from 2.6 percent in 2024. The slowdown reflects lower energy prices, moderating food costs, and improved supply conditions.

“Easing inflation has given central banks greater policy space to support growth,” said APEC PSU researcher Glacer Niño A. Vasquez. “But risks remain, particularly from renewed trade restrictions and geopolitical shocks.”

Kuriyama also highlighted that current-account imbalances across the region have widened since the Covid-19 pandemic, increasing exposure to external shocks and financial volatility as surpluses grow larger and deficits deepen.

The report pointed to record-high semiconductor sales fueled by AI demand as a driver of productivity gains. However, it cautioned that investment is becoming increasingly concentrated, raising concerns over market dominance, supply-chain vulnerabilities, and the sustainability of expected returns.

To sustain growth, the report urged APEC member economies to strengthen policy priorities for credible economic management. Recommendations include using easing inflation to support growth, maintaining policy credibility, and reinforcing prudential oversight through strong institutions to ensure coherent, market-friendly policies that reduce uncertainty.

It also encouraged inclusive and productivity-enhancing reforms, such as linking rising AI investment with skills development, improving labor market mobility, fostering competitive markets, and investing in reliable infrastructure to ensure productivity gains are sustainable and widely shared.

Finally, the report called for adaptive regional coordination, with APEC playing a stabilizing role by deepening policy alignment, enhancing information sharing, and strengthening institutional flexibility to boost predictability and confidence amid ongoing global uncertainty.