The Asia-Pacific region’s economy achieved a solid 3.3 percent growth in 2025, successfully exceeding earlier projections of 3.2 percent. However, recent analysis warns that this momentum is beginning to fade. According to the latest report by the APEC Policy Support Unit (PSU) presented in Suzhou, China, regional economic expansion is facing severe headwinds.
Growth is projected to ease to 3.1 percent in 2026 and moderate further to 3.0 percent in 2027, as output expansion slows down in more than half of APEC economies.
The primary catalyst behind this weakening outlook is the wider disruption in the Middle East. Geopolitical instability has sent oil prices surging by an astounding 52.8 percent since February 2026, climbing from USD 68 to USD 103.9 per barrel in March.
This spike directly vulnerabilities the region’s infrastructure: oil and gas make up 49 percent of APEC’s energy mix, with the region importing more than 45 percent of its crude oil and 23 percent of its gas from the Middle East.
“The region enters 2026 with short-term resilience intact, but knock-on energy price shocks, weakening demand, intensifying supply chain disruptions and narrowing space to respond to economic shocks are casting a longer shadow over the medium-term outlook. It is ordinary households and businesses that are feeling the consequences most.”
– Carlos Kuriyama, Director of the APEC Policy Support Unit.
The energy crisis has generated a worrying domino effect on regional food security. Because APEC imports 27 percent of its nitrogen-based fertilizers from the Middle East, agricultural production costs are soaring. Consequently, food prices are climbing sharply across the region, with vegetable oils, cereals, and meat facing the steepest increases.
Furthermore, the report highlights a worsening trend in global trade fragmentation. A sharp increase in trade-restrictive measures, such as tariffs and trade remedies, is severely weighing down the volume of merchandise exports. Growth in this sector is projected to significantly decline to 3.3–3.7 percent between 2026 and 2028, a sharp drop from the robust 7.6 percent recorded in 2025.
The cumulative effect of these overlapping economic disruptions is feeding through to inflation. While price pressures are expected to edge up, with average inflation projected to rise from 2.4 percent in 2025 to 2.9 percent in 2026, the APEC region is still forecasted to remain well below the global average of 4.4 percent.
The major hurdle for member economies is mounting public debt. High levels of debt mean that governments now have limited fiscal space to absorb further economic shocks or implement broad subsidy programs.
APEC’s Recommendations
To mitigate the impact of this slowdown and protect vulnerable populations, the PSU report outlines three strategic pillars for regional cooperation:
- Supply Chain Resilience: Harnessing digital platforms and broadening supply chain routes and services to bypass port congestion and rising freight costs.
- Energy Diversification: Investing heavily in alternative energy infrastructure and diversifying supply sources to reduce vulnerability to external shocks.
- Targeted Support: Extending practical and direct financial support for affected households and small businesses to cushion the rising cost of living.
The report concludes that in an interconnected and highly volatile global environment, regional cooperation on energy security, trade resilience, and fiscal stability is no longer just beneficial, it is essential to sustain shared prosperity across the Asia-Pacific.
Reference
APEC. 2026. “APEC Sees Moderating Growth Amid Rising Energy Costs and Supply Chain Pressures.” Asia-Pacific Economic Cooperation, May 21. https://www.apec.org/press/news-releases/2026/0521_ARTASOM2