BUSINESS | Asia-Pacific outlook: Election spending, trade tensions shape regional growth
Moody’s Analytics provides financial intelligence and analytical tools and is distinct from the rating agency Moody’s Ratings.
Makati Central Business District (CBD). Source: TechSabado.com file photo
Economic growth across Asia-Pacific showed mixed signals this week as governments grappled with shifting trade policies, election spending, and inflationary pressures. From China’s renewed stimulus efforts to Southeast Asia’s varied performance, the region’s economies are adjusting to both internal and external pressures.
China’s trade turmoil prompts policy response
After months of escalating rhetoric, the United States and China have agreed to resume trade talks aimed at reversing recent tariff hikes. U.S. Treasury Secretary Scott Bessent and Trade Representative Jamieson Greer will meet with China’s Vice Premier He Lifeng over the weekend. The talks follow tit-for-tat tariffs that pushed levies as high as 145% on many goods, severely limiting trade.
April trade data showed Chinese exports to the U.S. falling by 21% year-over-year, while imports from the U.S. declined 14%. To mitigate the economic fallout, Chinese authorities unveiled a series of stimulus measures, including rate cuts and funding boosts for technology and exporters.
“The pain is now apparent in the data,” noted economists at Moody’s Analytics. A halving of tariffs is anticipated by the end of May, which could allow for limited trade resumption and set the stage for more substantial negotiations.
Philippine growth gets pre-election boost
In the Philippines, first-quarter GDP grew 5.4% year-over-year and 1.2% on a seasonally adjusted basis. The expansion was driven by a surge in government spending ahead of the general elections on May 12. Private consumption also increased, aided by easing inflation and lower borrowing costs.
With President Ferdinand Marcos Jr. midway through his term, the election is viewed as a referendum on his administration’s economic agenda. All seats in the House of Representatives and half of the Senate are up for grabs, amplifying the political stakes.
Indonesia slows as budget cuts bite
Indonesia’s GDP growth slowed to 4.9% year-over-year in the March quarter, down from 5% in the previous quarter. Private consumption supported growth, but government spending fell following budget cuts ordered by President Prabowo Subianto. The cuts, totaling roughly 8.5% of the 2025 national budget, dampened overall output.
Vietnam resilient amid trade uncertainty
Vietnam reported strong retail sales and steady inflation in April, though industrial production slowed. The country’s economic outlook remains clouded by volatile U.S. trade policy. After initially floating a 46% tariff on Vietnamese goods, President Donald Trump scaled back the measure to a 10% tariff for 90 days. The uncertainty is a key risk to Vietnam’s export-driven growth.
Australia’s labor secures strong mandate
In Australia, Prime Minister Anthony Albanese’s Labor Party secured a decisive second term, winning at least 91 seats in the lower house. The opposition Liberal-National Coalition suffered its worst defeat in history. The result gives Labor greater leverage in pushing legislation, though Senate approval may still require support from independents or the Greens.
Labor’s modest economic agenda included $17.1 billion in tax cuts and increased spending on childcare and housing. In contrast, the Coalition had proposed measures such as fuel excise reductions and access to retirement savings for home deposits. Economists expect no major policy shifts in the short term, but pressure may build as global conditions deteriorate.
Regional indicators: Mixed but stable
Key indicators for April painted a mixed picture. Inflation eased in Taiwan and the Philippines, while Thailand saw deflation. Taiwan’s currency surged nearly 10% against the U.S. dollar due to insurer hedging activity. Meanwhile, Malaysia’s industrial output jumped to 3.2% in March, led by manufacturing and mining, although the outlook remains uncertain due to weakening global demand.
Looking ahead, Japan’s first-quarter GDP is expected to show flat or slightly negative growth. Consumer spending remains weak as inflation continues to outpace wage gains. China’s April inflation data is also anticipated to reflect further price declines, with a 0.2% drop in consumer prices and a 2.9% fall in producer prices projected.
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