ADB slashes 2026 growth outlook for Thailand, Singapore by nearly half
Vietnam bucks the bank’s regional downgrades with a slight lift for 2025
[SINGAPORE] The Asian Development Bank (ADB) trimmed its full-year growth projections for all major South-east Asian economies – save for Vietnam with a slight lift for the year – with Thailand and Singapore facing the steepest downgrades of at least a whole percentage point.
The downward revisions reflect persistent global growth deceleration, heightened trade uncertainty and domestic challenges, said the multilateral development bank on Tuesday (Sep 30) in an update to its flagship outlook report published every April.
ADB also expects the boost from the tariff front-running, which buoyed the region’s exports in the first half of the year, to evaporate.
As a whole, South-east Asia is now expected to grow 4.3 per cent this year and the next, compared with an earlier 4.7 per cent estimated for both years.
Thailand: Hit on all fronts
South-east Asia’s second-largest economy saw among the harshest downgrades in the region.
Compared with economic growth of 2.5 per cent last year, the bank now expects Thailand to end the year with real gross domestic product growth of 2 per cent, down from an earlier forecast of 2.8 per cent.
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The kingdom faced a deeper cut for 2026, with ADB trimming its forecast to 1.6 per cent from an earlier estimate of 2.9 per cent.
Thailand is under pressure from all sides, with the bank attributing the downward revisions to external and domestic factors.
Slapped with a tariff of 19 per cent, Thailand will see exports slow, particularly that of electrical equipment, machinery, metals, processed food and vehicles, said ADB, noting that this also hurts Thailand’s industrial production outlook.
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Tourism, which makes up an eighth of the kingdom’s GDP, will be hit by a slow recovery of Chinese travellers, increased competition from other regional destinations and weakened currencies in other countries, added the bank.
In turn, the slow recovery in tourism undermines the kingdom’s services, which, coupled with concerns over domestic political stability, will hurt private investment.
Moreover, private consumption is expected to slow on declining income, weak consumer confidence, persistently high household debt and a drop in farm incomes from lower agricultural prices, noted ADB.
Overall, economic growth could even slow below the forecast on a larger-than-expected impact from US tariffs, slower-than-anticipated tourism recovery and increased geopolitical tensions – made worse by domestic economic fragility, concluded the bank.
Singapore: Outsized blow from US tariffs
Compared with economic growth of 4.4 per cent last year, the bank now expects Singapore’s 2025 growth to come in at 2.5 per cent, down from an earlier estimate of 2.6 per cent.
The government’s own forecast comes in at 1.5 to 2.5 per cent, upgraded in August from an earlier 0 to 2 per cent.
The Republic faced a much steeper cut for 2026, with ADB trimming its forecast to 1.4 per cent from an earlier estimate of 2.4 per cent.
Despite a robust first half, the bank believes that economic growth will moderate into the year as expansion slows in outward-oriented sectors, such as wholesale trade, transportation and storage.
Such impacts from US tariffs will weigh even more heavily on Singapore’s economy next year.
ADB principal economist John Beirne said in a press briefing in response to questions by The Business Times: “The extent of external demand due to the tariffs has been the major factor behind our downward revision in the case of Singapore.”
He continued: “This has been more than we had anticipated earlier, and the factor behind this is really related to the share of final demand accounted for by Singapore relative to the US.”
The report also noted that additional US tariffs on pharmaceuticals and semiconductors would mostly affect South-east Asia, with the former primarily hitting Singapore.
On how the latest US pharmaceutical duties announced last Thursday (Sep 25) shapes the region’s outlook, Beirne replied: “Overall, despite the extent of the tariffs, we would see that the exemptions in place and the nature of the tariffs in terms of scope would mean that the impact on South-east Asia and the region overall would be very, very marginal.”
The lowdown on Trump’s pharma tariffs
What: 100% levy on any branded/patented pharmaceutical product
Exemptions (so far): Companies that have already begun construction of their pharmaceutical manufacturing plant(s) in the US
Significance to Singapore:
- Pharmaceuticals make up some S$4 billion or 13 per cent of the republic’s exports to the US
- A large share of these exports comprises patented, branded medicines
- Singapore hosts nine of the world’s top 10 pharma firms
Trade-related inflationary pressures are also clouding US monetary policy, noted ADB, and such uncertainty could increase financial market volatility and destabilise capital flows, which would hinder financing and investment.
Vietnam: Buoyed by expansionary domestic policies
Vietnam is the only South-east Asian economy that saw an improvement in its 2025 growth forecast to 6.7 per cent from ADB’s earlier April forecast of 6.6 per cent.
The country notched a multi-year high GDP growth of 7.52 per cent in the first half of 2025, driven by robust exports, strong improvement in the manufacturing and services sectors, as well as a surge in foreign direct investment disbursements.
For 2026, growth is expected to moderate to 6 per cent, down from an earlier estimate of 6.5 per cent.
ADB expects Vietnam’s economy to remain resilient, supported by expansionary fiscal and monetary policies that have boosted domestic consumption.
That said, weaker manufacturing and exports from US tariffs may curb demand for logistics, finance and business services.
And if trade tensions persist – clouded by uncertainty over transshipment tariffs – investment could slow and constrain growth in high-value service industries next year, said ADB.
Growing financial vulnerabilities and delays in policy coordination could limit the effectiveness of stimulus measures as well, noted the bank.
Moderating price pressures
On the other hand, inflation prints are broadly looking better.
ADB cut its inflation projections for the region to 2.5 per cent in 2025 from an earlier 3 per cent, and to 2.7 per cent in 2026 from a previous estimate of 2.8 per cent. This compares with 3 per cent in 2024.
Across South-east Asia, lower food and energy prices continued to underpin consumer price disinflation, said the bank – even as core inflation remained largely steady since mid-2024 and food price pressures edged up in some economies in August.
Inflation dynamics generally remain muted across the region, the report found, highlighting weak commodity prices and timely domestic policy responses.
Against a backdrop of moderating price pressures and intensifying external risks, monetary policy across South-east Asia broadly shifted towards easing this year, with central banks expected to maintain accommodative stances into the next year.
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