INDONESIA
Rupiah falls to record low over investor concerns over fiscal discipline and central bank independence
(23 January 2026) Indonesia’s rupiah fell to a record low of 16,988 per US dollar on 20 January, surpassing the previous peak from April 2025, despite central bank intervention. The currency has been on a downward trend since August 2025, and analysts expect further weakening in 2026. The January decline was driven by investor concerns over fiscal discipline, policy direction and potential pressure on Bank Indonesia’s independence rather than global trade shocks. Investor sentiment deteriorated after the resignation of Finance Minister Sri Mulyani Indrawati in late August, Bank Indonesia’s subsequent agreement to share debt costs for President Prabowo Subianto’s priority spending programmes, and proposals to revise the central bank law. Bank Indonesia also delivered two consecutive surprise rate cuts, lowering the benchmark rate by a cumulative 125 basis points in 2025 and narrowing yield differentials with US Treasuries. Capital outflows intensified as foreign investors reduced exposure to Indonesian bonds and equities. Concerns resurfaced on 19 January when Prabowo nominated his nephew, a deputy finance minister, as Bank Indonesia deputy governor, with the rupiah falling 0.3% that day. Fiscal risks have increased, with the 2025 budget deficit reaching 2.92% of GDP, close to the 3% legal ceiling, and analysts warning of a potential breach this year. Bank Indonesia has intervened through foreign-exchange sales, bond purchases and non-deliverable forwards, while holding the policy rate steady for a fourth month in January. Bank Indonesia’s governor said the central bank would conduct large-scale interventions if needed, supported by foreign-exchange reserves of USD 156.5 billion at end-2025. Analysts expect the rupiah to test 17,000 per dollar in the first quarter, with Barclays projecting levels as weak as 17,300 this year. A weaker currency is expected to raise import costs, risk pushing inflation above target and constrain further monetary easing despite government efforts to stimulate growth.

MALAYSIA, UNITED STATES
Bilateral trade between Malaysia and United States increases in 2025 despite global uncertainties
(27 January 2026) Bilateral trade between Malaysia and the United States increased in 2025 despite global uncertainty, according to outgoing US Ambassador to Malaysia Edgard D. Kagan. Malaysian exports to the US rose by about 14% in the first 11 months of 2025, while US exports to Malaysia grew by roughly 8% over the same period. Kagan said the figures reflected a resilient trade relationship and cited recent initiatives aimed at deepening bilateral economic engagement. He made the remarks on 27 January at a farewell reception in Kuala Lumpur, where he launched the Freedom 250 Road Show. The Freedom 250 Road Show marks the start of a year-long programme leading up to the 250th anniversary of the United States in 2026. Kagan is concluding 35 years of service with the US government. He identified education exchanges as a key priority during his tenure, particularly efforts to position Malaysia as a study destination for American students. He said preparatory work had been completed and expected visible progress within six to 18 months.

MALAYSIA
Total trade projected to expand by 3% to 5% in 2026 after reaching record in 2025
(27 January 2026) Malaysia’s total trade is projected to expand by 3% to 5% this year after reaching a record MYR 3.061 trillion in 2025, Malaysia’s Deputy Investment, Trade and Industry Minister said following the release of the 2025 trade performance. Total trade in 2025 rose 6.3% year on year, surpassing MYR 3 trillion for the first time. Exports increased 6.5% to a record MYR 1.607 trillion, marking the fifth consecutive year above MYR 1 trillion. Imports grew 6.2% to MYR 1.455 trillion. The trade surplus reached MYR 151.8 billion, extending Malaysia’s surplus streak to 28 consecutive years since 1998. The minister said trade growth in 2026 would remain challenging due to geopolitical tensions and technological disruptions. The ministry, through Matrade, will intensify export promotion and pursue additional bilateral trade agreements. Malaysia concluded negotiations on a free trade agreement with South Korea last year covering goods, services, investment, customs facilitation, sanitary and phytosanitary measures, digital trade, the green economy, the bioeconomy and economic cooperation. The Malaysia–Korea FTA is expected to be signed by mid-year. Matrade’s chairman said any trade slowdown would likely be moderate due to earlier front-loading of purchases by some countries. Matrade plans to roll out more than 200 promotion and development activities this year. Matrade said efforts would focus on market diversification, leveraging FTAs and closer collaboration with industry partners. The minister said competitiveness would be strengthened through the digital economy and cross-border e-commerce, alongside industrial and skills upgrading to address structural issues such as low wages, reliance on unskilled foreign labour and income disparities.

THAILAND
Thailand’s economy expected to expand at slowest pace in three years in 2026
(27 January 2026) Thailand’s economy is expected to expand at its slowest pace in three years in 2026 as exports and domestic demand soften, according to the finance ministry. The ministry cut its 2025 GDP growth forecast to 2.2% from 2.4%, compared with 2.5% growth in 2024. It maintained a 2026 growth projection of 2%, above the Bank of Thailand’s estimate of 1.5% and the 1.7% median forecast from economists surveyed by Bloomberg. If realised, the outlook would mark Thailand’s weakest growth since 2014 outside the pandemic years. The ministry cited headwinds including US trade policies, a stronger baht and weakening domestic demand. Government spending is expected to be subdued in the first half due to delays in forming a new administration following the 08 February election. Merchandise exports are forecast to rise by 1% this year, down sharply from an estimated 12.7% increase in 2025. Private consumption growth is projected to slow to 2.5% from a forecast 3.3% in 2025. The baht has appreciated more than 8% over the past 12 months, ranking as the second-best performer among Asian currencies tracked by Bloomberg. Currency strength, partly driven by dollar selling linked to gold trading, has weighed on exports and tourism. Authorities have tightened oversight of baht-denominated bullion transactions to curb speculative flows. The finance ministry said GDP growth in the fourth quarter is likely to be 1.8% year on year. Official full-year growth figures are scheduled for release on 16 February.

VIET NAM
Increased loan guarantees by Vietnamese lenders raises hidden risks
(28 January 2026) Vietnamese banks increased loan guarantees by 19% to VND 52 trillion in the first nine months of last year, exceeding the 13% growth in total equity at 27 listed lenders, according to VIS Rating data. The guarantees, often structured as standby letters of credit, are kept off balance sheets and are not separately disclosed, raising the risk of unrecognised exposures if borrowers default. VIS Rating said this trend adds pressure to already thin capital buffers and could weaken banks’ loss-absorption capacity as capital raising remains limited. Fitch Ratings has separately warned that rapid credit growth and high leverage increase sector vulnerability. The State Bank of Vietnam earlier this month reduced its 2026 credit growth target to about 15% after tightening credit to riskier sectors. Fitch estimates Vietnamese banks’ tier 1 capital ratio at 9.5% last year, compared with 23% in Indonesia, 17.5% in Thailand and 15.6% in Malaysia. Vietnamese conglomerates have used SBLC-backed structures for offshore financing, including Vingroup. Rating firms said the growing use of guarantees alongside thin capitalisation increases the risk of adverse impacts if an economic shock occurs.

VIET NAM, EUROPEAN UNION
EU and Viet Nam to expand trade and investment cooperation in critical minerals, chips, and infrastructure
(28 January 2026) The European Union and Viet Nam plan to expand trade and investment cooperation in critical minerals, semiconductors and infrastructure, according to a draft eight-page joint statement set to be adopted on Thursday as both sides upgrade diplomatic relations. The document, to be signed during a visit to Hanoi by European Council President Antonio Costa, states the EU will also explore possible transfers of non-sensitive defence technology and closer cooperation on trusted telecommunications networks. Diplomatic ties will be elevated to Viet Nam’s highest level, matching those with the United States, China and Russia. The statement highlights cooperation on sustainable mining and processing of critical minerals, noting Viet Nam’s largely undeveloped rare earth and gallium deposits and its role as a major tungsten supplier. It identifies semiconductors as a priority sector, citing Viet Nam’s role in chip packaging, testing and assembly and the start of construction of its first semiconductor production facility earlier this month. The document also references supply chain expansion involving suppliers to ASML that have shifted some production to Viet Nam. Cooperation on trusted communications infrastructure, including 5G and satellite connectivity, is identified as a focus area, alongside increased security cooperation. EU countries expressed interest in investing in Vietnamese infrastructure, including railways, linked to Viet Nam’s planned nationwide high-speed rail project.

EAST TIMOR, AUSTRALIA
Australia to donate one-third of future revenue from Greater Sunrise gas development project
(28 January 2026) Australia will donate at least one third of its future revenue from the Greater Sunrise gas development to Timor-Leste under a new partnership announced by Prime Minister Anthony Albanese and Timor-Leste Prime Minister Xanana Gusmao. The commitment was formalised in a joint declaration covering expanded economic, defence and cultural cooperation. Australia will also create an infrastructure fund for Timor-Leste funded from Australia’s share of Greater Sunrise revenue, lifting the transfer to at least one third of expected earnings. The partnership includes an agreement that gas from Greater Sunrise will be processed in Timor-Leste. Sunrise lies partly in jointly administered waters and requires agreement between both governments and the project partners on fiscal, regulatory and legal frameworks, which remain under negotiation. Woodside Energy said work is still required on administrative, fiscal and regulatory arrangements before development can proceed. The Greater Sunrise complex, now referred to as TLNG, is expected to cost several billion dollars and includes a 5 million tonne-per-year LNG plant, a domestic gas facility and a helium extraction unit. Production is projected for 2032 to 2035, subject to approvals and project economics. The Sunrise and Troubadour fields hold an estimated 5.1 trillion cubic feet of gas and are located about 450 kilometres north-west of Darwin and 150 kilometres south of Timor-Leste. Timor-Leste owns a majority stake in the project after acquiring Shell and ConocoPhillips’ interests in 2018. Woodside reached an agreement with Timor-Leste’s petroleum ministry in November to progress discussions after abandoning plans to route gas to Darwin, but the development concept remains unresolved.

RCEP Monitor

SOUTH KOREA
Trump administration announces increase on tariffs on South Korea from 15% to 25%
(27 January 2026) US President Donald Trump announced an increase in US tariffs on South Korean imports to 25% from 15%, citing Seoul’s failure to fully implement a trade deal reached in October last year. The higher tariffs would apply across products including automobiles, lumber, pharmaceuticals and other reciprocal tariffs. Trump said the US had already reduced its tariffs under the agreement, while South Korea’s National Assembly has been slow to approve it. South Korea said it had not received official notice of the tariff increase and requested urgent talks with Washington. South Korea’s Industry Minister is expected to visit Washington to meet the US Commerce Secretary. South Korea exported about USD 123 billion of goods to the US last year, including around USD 30 billion in cars. Analysts indicated markets were sceptical the tariff increase would be implemented, noting recent US reversals on other tariff threats. The October agreement included a South Korean pledge to invest USD 350 billion in the US, partly in shipbuilding. The US agreed in November to reduce some tariffs once South Korea began the approval process. The agreement was submitted to the National Assembly on 26 November and is under review, with passage expected in February. Tariffs would be paid by US importers on South Korean goods. Trump has continued to use tariff threats as leverage in foreign policy, including recent warnings involving Canada, China, the UK and other countries.

AUSTRALIA
Inflation accelerates above forecasts in late 2025, increasing pressure on Australian central bank
(28 January 2026) Australian inflation accelerated above forecasts in late 2025, increasing pressure on the Reserve Bank of Australia to raise interest rates at its meeting on 03 February. The Consumer Price Index rose 3.8% year on year in December, up from 3.4% in November, while monthly inflation was 1.0%, according to the Australian Bureau of Statistics. The trimmed mean measure of underlying inflation increased to 3.3% annually from 3.2% the previous month. Quarterly data showed CPI rising 0.6% in the December quarter and 3.6% annually, with the quarterly trimmed mean at 0.9% and the annual trimmed mean lifting to 3.4%, above economist forecasts. Following the data, Westpac and ANZ revised their expectations to a rate increase next week, with all four major banks now forecasting a 0.25 percentage point hike. Westpac said any February increase may be a single move rather than the start of a sustained tightening cycle. Housing costs were the largest contributor to annual inflation, rising 5.5%, driven mainly by electricity prices. Electricity prices rose 21.5% over the year, reflecting the expiry of state government rebates, while excluding rebates prices increased 4.6%. Food and non-alcoholic beverages were the second-largest contributor, rising 3.4%. Fitch-linked commentary and private economists described a rate rise as increasingly likely, with Capital Economics saying it was “all but certain”. Some analysts, including RSM Australia, said the decision remains finely balanced but acknowledged that persistent underlying price pressures have increased the probability of near-term tightening.

JAPAN
Strong demand at bond sale eases near-term market pressures
(28 January 2026) Demand at Japan’s 40-year government bond auction strengthened, easing near-term pressure in the super-long market ahead of a snap election. The bid-to-cover ratio rose to 2.76 from 2.585 at the previous sale, the strongest since March. The 40-year yield fell 3.5 basis points to 3.9%, retreating from a recent record high of 4.215%. Yields on 10- and 20-year bonds also declined, supporting a broader rally across the curve. Market participants said the auction provided temporary relief following heightened volatility triggered by Prime Minister Sanae Takaichi’s proposal to suspend sales tax on food for two years. The Ministry of Finance is scheduled to sell 10- and 30-year bonds next week, with results expected to test whether demand remains stable ahead of the 08 February election. Meiji Yasuda Life Insurance said super-long Japanese government bonds are now attractive and it is assessing entry points, while Pacific Investment Management Co reaffirmed its position in 30-year bonds. Officials acknowledged ongoing concern about managing market stability through the election period. Fiscal uncertainty has increased after the main opposition party pledged a permanent food tax cut. Separately, the yen strengthened to its highest level since October following official comments that raised speculation of possible market intervention and a weaker US dollar.