New Delhi: Asia Pacific’s economic growth is expected to remain broadly stable in 2026 despite global uncertainties from tariff realignments, geopolitical tensions, and uneven technological gains, with India projected to emerge as the fastest-growing major economy in the region, according to the Mastercard Economics Institute’s (MEI) annual economic outlook.
MEI forecasts India’s GDP to grow by 6.6% in 2026, with inflation moderating to 4.2%, supported by strong domestic demand, monetary easing, tax reforms, GST rationalization, and softer global commodity prices. The institute said favourable demographics, rapid digitisation, and accelerating adoption of artificial intelligence (AI) continue to position India as a key driver of Asia-Pacific growth.
Globally, MEI expects real GDP growth to ease marginally to 3.1% in 2026, from an estimated 3.2% in 2025, as economies adjust to shifting trade patterns and rapid technological change. While fiscal stimulus and AI-led productivity gains are expected to support growth, the benefits are likely to be uneven across regions.
“Given its centrality to global trade, Asia Pacific has shown remarkable resilience at a time when tariff uncertainty and shifting supply chains have threatened to upend international commerce,” said David Mann, chief economist, Asia Pacific, Mastercard. He added that improving microeconomic conditions across much of the region are supporting consumer demand even as global trade realignments continue.
India: Domestic Demand, AI & Tourism
MEI noted that India’s growth momentum in 2026 will be driven primarily by domestic demand, aided by easier monetary conditions and policy reforms. Expansion in global capability centres, increased economic activity in Tier 2 and Tier 3 cities, and rising digital adoption are expected to remain key growth engines.
Tourism is also emerging as an important lever for India’s economy, helping improve external stability and support local businesses. Destinations such as Goa, Rishikesh and Amritsar are seeing increased interest from experiential and spiritual travellers, reflecting a broader shift in consumer preferences towards experiences over goods.
India’s readiness to benefit from the next wave of productivity gains is underscored by its AI Enthusiasm Index score of 8, indicating strong momentum in AI adoption among businesses and consumers.
Asia Pacific: To Remain Resilient
Despite ongoing trade fragmentation following tariff changes in 2025, MEI expects GDP growth across Asia Pacific to remain steady in 2026. The reconfiguration of global supply chains has led the Chinese mainland to diversify exports to new markets, while economies such as India, ASEAN members, and the Chinese mainland are playing expanding roles in global sourcing and investment.
Consumers across the region are expected to remain tech-enabled and value-conscious, prioritizing travel, live events, and meaningful experiences while staying price-sensitive on essentials. Travel continues to act as a strong economic engine, with both outbound and intra-regional tourism gaining momentum.
Regional highlights
Chinese mainland: Growth is forecast at 4.5%, supported by strengthening consumption, “new consumption” categories such as wellness and lifestyle upgrades, and expected rate cuts under the upcoming Five-Year Plan.
South Asia: Sri Lanka is expected to grow 3.7%, while Bangladesh is forecast at around 5%, aided by easing inflation and remittance inflows.
Japan: GDP growth is projected at 1.0%, supported by rising real incomes, AI and semiconductor investments, and accommodative monetary policy.
ASEAN-5: Indonesia and the Philippines are expected to grow 5.0% and 5.6%, respectively, while Malaysia, Singapore, and Thailand see more moderate growth.
Australia and New Zealand: Growth is forecast at 2.3% and 2.4%, supported by easing cost pressures and a rebound in household spending.
The MEI cautioned that risks remain, including energy price volatility, external shocks, and disparities in technological progress. “How governments and businesses respond to these challenges will shape the next phase of growth,” Mann said, emphasizing the importance of digital readiness and adapting to evolving consumer demand.
(Cover photo by Sid Saxena on Unsplash)