INDONESIA
Indonesia’s fiscal deficit reaches 2.92% of GDP in 2025, highest level in two decades
(08 January 2026) Indonesia’s fiscal deficit reached IDR 695.1 trillion, equivalent to USD 41.4 billion or 2.92% of gross domestic product, in 2025, marking the highest level in at least two decades outside the pandemic years. Indonesia’s finance minister disclosed the unaudited figures, noting that the outcome exceeded the original target of 2.53% and the revised target of 2.78%. Bloomberg data show the ratio was the highest since 2005, excluding 2020 and 2021. The finance minister stated that spending was maintained to support economic expansion amid global uncertainty while keeping the deficit below the legal 3% cap. State expenditure rose 2.7% year on year to IDR 3,451.4 trillion, while state revenue declined 3.3% to IDR 2,756.3 trillion. Tax collection reached only about 90% of the government’s target. He cited higher tax refunds linked to weaker business profits in the trade and mining sectors, fiscal incentives for consumers, and lower oil, coal and nickel prices reducing non-tax revenue. Analysts highlighted risks to fiscal sustainability under the new finance minister, with Credit Agricole CIB expecting the deficit ratio to remain within 2.8% to 3% in coming years. Following the data release, the rupiah recorded a small loss against the US dollar, the 10-year government bond yield was unchanged, and equities reversed earlier gains. Analysts warned that a persistently high deficit could pressure the rupiah towards 16,900 per dollar and lift benchmark yields to as high as 6.2%.

INDONESIA
Authorities target 16 to 17.6 million foreign tourist arrivals in 2026
(13 January 2026) Indonesia’s government has set a target of 16 to 17.6 million foreign tourist arrivals in 2026. The government is targeting tourism foreign exchange earnings of between IDR 22 billion and IDR 24.7 billion. Tourism’s contribution to gross domestic product is projected to increase to between 4.5% and 4.7%. Agreed strategies include accelerating infrastructure development and improving connectivity between new and existing airports. Joint programmes between central and regional governments will be implemented in priority tourism destinations. Entry access for foreign tourists will be simplified through an evaluation of visa policies, with proposed changes to be reported to the President. Governance reforms will focus on digitalisation through integrated licensing systems and strengthened safety standards supported by tourism insurance. Government-borne income tax incentives for tourism workers will be provided in 2025 and 2026. As of the third quarter of 2025, tourism contributed 3.96% to GDP, generated USD 13.82 billion in foreign exchange earnings, and supported 25.91 million jobs. Total foreign tourist arrivals reached 13.98 million as of November 2025, with average spending per visitor at USD 1,259, led by visitors from Malaysia, Australia, Singapore, and China.

INDONESIA
Indonesia sells USD 2.7 billion worth of US-dollar-denominated bonds
(12 January 2026) Indonesia sold USD 2.7 billion of US-dollar-denominated bonds, marking the first such issuance by an Asian sovereign this year amid record global debt issuance at the start of 2026. The offering comprised three tranches with maturities ranging from five to 30 years. The longest tranche was a USD 500 million note maturing in 2056, priced to yield 5.5% after initial price guidance of around 5.8%. The issuance comes as the administration of President Prabowo Subianto seeks to finance a widening fiscal gap that risks breaching the statutory budget deficit cap of 3% of gross domestic product in 2026. Indonesia’s budget deficit reached 2.92% of GDP last year, the highest level in at least 20 years. For this year, the government has set a deficit target of 2.68% of GDP. Total net bond issuance, including domestic and foreign currency debt, is budgeted at IDR 799.5 trillion, equivalent to USD 47.4 billion. Citigroup revised its 2026 budget deficit forecast for Indonesia to 3.5% of GDP from 2.7%, citing expectations of accelerated spending on a free-meals programme and increased transfers to regional governments.

THE PHILIPPINES
Peso weakens to record low of 59.38 per US dollar in early January 2026
(13 January 2026) The Philippine peso weakened to a record low of 59.38 per US dollar in early January before partially recovering, with authorities signalling tolerance for further depreciation and limited intervention. The peso has fallen more than 3% since July following President Ferdinand Marcos Jr.’s disclosure of alleged misuse of flood infrastructure funds, which triggered investigations, mass protests and foreign investor withdrawals. Foreign investors recorded net equity outflows of USD 220 million between 29 July and 09 January, accounting for over 40% of local stock market turnover. The Bangko Sentral ng Pilipinas stated that business confidence and domestic growth prospects weakened amid concerns over public infrastructure spending. Expectations of further monetary easing have also weighed on the currency, with the central bank having cut rates by 200 basis points since August 2024 and signalling a possible additional cut this year. The government lowered its 2026 growth target to 5%–6% from 6%–7%, while other institutions also revised forecasts lower. Additional pressures include a 19% US tariff on Philippine goods imposed in August, weaker factory activity, and softer investment and services export inflows. Remittance inflows reached a record USD 34.5 billion in 2024 and were expected to rise to USD 35.5 billion, with a weaker peso boosting local purchasing power and household consumption, which accounts for about two-thirds of GDP. Currency depreciation could also support business-process outsourcing employment, which totals nearly 2 million workers, and improve export competitiveness, potentially narrowing a monthly trade deficit averaging USD 3 billion to USD 4 billion. Conversely, peso weakness raises import costs and inflation risks, particularly for fuel, machinery, electronics and food. The Department of Budget and Management estimates that every one-peso depreciation could generate an additional 9.3 billion pesos in tax revenue in 2026.

THAILAND
Exports forecast to grow by 2% to 4% in 2026, supported by expansion in electronics sector
(13 January 2026) Thailand’s exports are forecast to grow by 2% to 4% in 2026, according to the Thai National Shippers’ Council (TNSC), supported by potential expansion in the electronics sector. The chairman of the TNSC said the outlook reflects resilience despite subdued global demand linked partly to US tariff measures and a high comparison base after double-digit export growth last year. The council stated that electronics shipments retain growth capacity and are expected to benefit from increased foreign investment. Food and processed agricultural products are continuing to access new markets with strong demand for Thai goods. Automotive parts and vehicles are also expected to expand in selected niche segments. The council estimated that total exports grew by more than 9% last year, driven by accelerated import demand from key trading partners during the first three quarters.

CAMBODIA, UNITED STATES, CHINA
Phnom Penh seeking to reduce reliance on China amidst US tariff threats
(14 January 2026) Cambodia is seeking to reduce its economic reliance on China, its largest foreign investor, donor and trading partner. China accounts for more than half of total investment into Cambodia and is the largest source of raw materials for its export-oriented manufacturing sector. Phnom Penh has reassessed this dependence following US trade actions, after President Donald Trump initially threatened 49% tariffs on Cambodian goods, later reduced to 19%. Cambodia’s deputy prime minister said this prompted a strategy to avoid reliance on any single country and to avoid taking sides in the US-China rivalry. Cambodia is diversifying its investor base by targeting capital from the US, Europe and Brazil, and has conducted recent investment roadshows in the US, Canada, Japan and South Korea. The government is also seeking to diversify export markets beyond the US, which currently absorbs 40% of Cambodia’s exports, mainly footwear and sportswear. Policy focus has intensified on reducing dependence on Chinese inputs amid expectations of stricter US rules of origin and potential levies of up to 40% on goods deemed transshipped from China. Cambodian officials said Cambodia expects changes in US requirements on component sourcing thresholds. They added that bilateral relations with the US have improved following clarification over the Ream naval base. Cambodia and China have denied hosting Chinese naval forces at Ream, and Phnom Penh cited recent port calls by Vietnamese and Japanese warships, with a US warship expected this year. The US government did not comment.

LAO PDR
Economic conditions in Laos showing signs of recovery as market activities normalise
(14 January) Economic conditions in Laos are showing signs of recovery, with market activity normalising and price pressures linked to exchange rate volatility easing in several areas. Traders at Lao Market on 450 Year Road in Vientiane reported a return to typical customer volumes as food purchasing patterns stabilise. Earlier inflation led to sharp increases in meat, fish, poultry and vegetable prices, driven mainly by higher vendor input costs across the country. Traders indicated that these cost pressures have moderated, allowing trade conditions to improve. Market activity in urban and community areas has become more vibrant, supporting a gradual recovery in small businesses and the trade and services sectors. Employment opportunities and household income sources are expanding, particularly in agriculture, small-scale commerce, services and tourism-related activities. The government is continuing economic stabilisation measures, including promoting domestic production, import substitution, support for small and medium-sized enterprises and stronger economic management. Despite improvements, the cost of living remains elevated and high prices for some essential goods continue to strain household budgets. Public confidence is nevertheless improving, with households reporting greater adaptability and optimism.

RCEP Monitor

AUSTRALIA
Household spending rises 1% month-on-month in November, exceeding forecast
(12 January 2026) Australian household spending rose 1% month on month in November, exceeding the 0.6% forecast. Spending increased 6.3% year on year, also above expectations, with average annual spending up 4.6% so far in 2025 compared with 3% in 2024. The ABS reported that services spending rose 1.2%, driven by major events such as concerts and sporting fixtures, which lifted expenditure on catering, transport, recreation and cultural activities. Goods and services spending continued the momentum seen in October, with services spending 7.8% higher than November 2024 and goods spending up 4.9% year on year. The strongest monthly increases were recorded in furnishings and household equipment, followed by clothing and footwear, and recreation and culture. Goods spending growth was supported by Black Friday sales, particularly in clothing, footwear, furnishings and electronics. Private consumption accounts for more than half of GDP, increasing the relevance of the data for monetary policy. The Australian dollar held gains as markets maintained expectations of a Reserve Bank of Australia rate hike by mid-year. The RBA cut rates by 75 basis points last year to 3.6%, but the bank’s governor has indicated the next move may be a hike after inflation exceeded the 2–3% target range.

AUSTRALIA
Consumer sentiment weakens in January mainly due to interest rate expectations
(13 November 2026) Australian consumer sentiment weakened in January, with the Westpac Banking Corp index falling 1.7 per cent to 92.9 points, indicating pessimists again outnumbered optimists. The decline was attributed primarily to shifting interest rate expectations, with nearly two-thirds of surveyed consumers now expecting mortgage rates to rise over the next 12 months, more than double the proportion in September. The Reserve Bank of Australia has held the cash rate at 3.6% since August but has highlighted ongoing inflation pressures alongside a tight labour market. The governor has signalled that further easing is unlikely in the near term and that the next policy move could be a rate increase. The survey followed official data showing household spending rose faster than expected in November, supported by higher services expenditure and pre-Christmas retail discounting. Market expectations are increasingly aligned with a rate hike by mid-year, although economist forecasts remain mixed. Commonwealth Bank of Australia and National Australia Bank anticipate at least one rate rise this year, while Bank of America expects rates to remain unchanged. The RBA’s next policy decision will follow its 2–3 February meeting, informed by December employment figures and fourth-quarter inflation data due in late January. All components of the Westpac survey remained below the neutral 100 level, marking only the second instance since October 2024 where pessimism outweighed optimism across all sub-indexes.

NEW ZEALAND
Filled jobs in November mark highest employment level since March 2026
(14 January 2026) New Zealand employment increased again in November, with filled jobs rising by 6,569 or 0.3% month on month to 2.35 million, according to Statistics New Zealand. This marked the highest level since March and followed a trough in July at a two-and-a-half-year low. The November outcome represented the third increase in four months and indicated a return to job growth in the final quarter of 2025 after five quarters of contraction or stagnation. Westpac reported that worker confidence rose to its highest level since early 2024 in the fourth quarter. It’s suggested that the unemployment rate may have peaked at 5.3% in the third quarter, the highest level in five years. Business sentiment has improved after being weakened by the 2024 recession and uncertainty following US trade policies announced in mid-2025. The New Zealand Institute of Economic Research survey showed sentiment at its highest level in almost 12 years. The survey also recorded the first quarterly increase in hiring in two years, with a net 22% of firms planning to increase staff numbers in the three months to March. Employment gains are supporting expectations that the economic recovery can be sustained following GDP growth of 1.1% in the September quarter. Economic conditions have been supported by monetary easing, with the Reserve Bank lowering the Official Cash Rate to 2.25% in November. This brought total rate cuts to 325 basis points since August 2024.

VIET NAM, THAILAND
Viet Nam projected to overtake Thailand in nominal GDP as early as 2026
(05 January 2026) Viet Nam is projected to overtake Thailand in nominal GDP as early as 2025, driven by accelerated public works spending and higher growth, while Thailand’s economy is slowing amid domestic political instability and its border conflict with Cambodia. Viet Nam’s real GDP is estimated to have grown about 8% in 2025, and the government targets growth above 10% from 2026. If realised, Viet Nam’s nominal GDP could reach the mid-USD 500 billion range by 2026 or 2027, surpassing Thailand and ranking third in Southeast Asia after Indonesia and Singapore, with per capita GDP exceeding USD 5,000. Public investment is a key driver, with 2026 infrastructure spending plans set to rise about 26%, potentially lifting growth by 1.6 percentage points versus 2025. Major projects include a new airport near Ho Chi Minh City scheduled to open in 2026 and a Chinese-backed railway under construction in northern Viet Nam. However, legal reforms and administrative streamlining remain constraints, with more than 2,000 investment projects facing obstacles. In contrast, the OECD forecasts Thailand’s real GDP growth at 1.5% in 2026, down 0.5 percentage point year on year, citing high household debt, weak consumption, a slow tourism recovery, and pressure on manufacturing from U.S. tariffs. The OECD warns Thailand risks being overtaken not only by Viet Nam but also by the Philippines. Geopolitical risks have increased following intensified Thailand–Cambodia border clashes since May, reducing bilateral trade and tourism and raising investor concerns. The OECD projects Viet Nam’s GDP growth at 6.2% in 2026, below Hanoi’s target, citing potential export slowdowns amid U.S. tariffs of around 20% on Southeast Asian countries, while Vietnamese economists highlight the need to diversify exports beyond the U.S. to markets in the Middle East, Africa and South America.

MALAYSIA
Malaysia expected to rely more on domestic demand in 2026 as external growth weakens
(06 January 2026) Malaysia is expected to rely more on domestic demand in 2026 as external growth weakens due to US tariffs, while the official forecast projects GDP expansion of 4.0%–4.5%, slightly slower than in 2025 and driven mainly by private consumption, investment and tourism. The Socio-Economic Research Centre said the key uncertainty is whether private consumption can continue to sustain growth amid spillover effects from US tariffs. Household spending is supported by a tight labour market, government cash assistance and a scheduled civil service salary increase, while inflation remains contained due to subdued commodity prices. Business investment growth may moderate as the wave of data centre investments reaches its later stage. Bank Muamalat Malaysia Bhd said downside risks include a heavier-than-expected impact from the US tariff regime, uncertainty over sector-specific trade measures, geopolitical disruptions to trade and energy flows, and continued global market volatility. Bank Negara Malaysia is widely expected to keep the overnight policy rate unchanged, supported by steady growth and benign inflation. The ringgit strengthened more than 10% against the US dollar in 2025 to around 4.06 and is forecast to appreciate further to as strong as 3.95 by end-2026, supported by looser US monetary policy, sustained foreign direct investment and tourist inflows linked to the Visit Malaysia Year campaign.

INDONESIA
Government bond market records net foreign inflow in 2025 after investors returned in December
(06 January 2026) Indonesia’s government bond market recorded a small net foreign inflow in 2025 after overseas investors returned in December, offsetting earlier outflows linked to political unrest and leadership changes. Finance ministry data compiled by Bloomberg show net foreign buying of USD 388 million in December, the first monthly inflow since August, resulting in a full-year net inflow of USD 337 million and extending annual foreign buying to a third consecutive year. From September to November, global funds sold about USD 4.6 billion of Indonesian bonds following unrest in several cities and the dismissal of long-serving finance minister Sri Mulyani Indrawati, alongside concerns over wider fiscal deficits under the new finance minister and potential pressure on Bank Indonesia’s independence. PT Mandiri Sekuritas said foreign positioning had become very light, making the market sensitive to even modest improvements in sentiment. They attributed the December inflows to a weaker US dollar and manageable domestic debt issuance. Bank Indonesia kept its policy rate unchanged in December to support rupiah stability while signalling it would continue to look for scope to cut rates, easing concerns about aggressive monetary easing to support government growth policies. Analysts state that foreign inflows could continue in 2026 if the US dollar and Treasury yields decline, but warned that risks remain from possible state revenue shortfalls amid plans for higher government spending.

INDONESIA
Headline inflation increases to 2.92% year-on-year in December
(06 January 2026) Indonesia’s headline inflation increased to 2.92% year on year in December from 2.72% in November, exceeding market expectations of 2.73% but remaining within Bank Indonesia’s 1.5%–3.5% target range, according to Kenanga Research. Full-year inflation averaged 1.9% in 2025, down from 2.3% in 2024 and in line with Kenanga’s forecast. Month-on-month inflation accelerated to 0.64% in December from 0.17% in November, the highest in eight months, mainly due to rising food prices. Core inflation edged up to 2.38% year on year from 2.36%, a seven-month high, indicating steady domestic demand. Inflation in food, beverages and tobacco rose to 4.58% from 4.25%, driven by higher prices of red chilies, fresh fish, chicken meat and onions. Transportation inflation increased to 1.23% from 0.71%, the highest in 16 months, reflecting rising vehicle prices. Inflation in personal care and other services surged to a record 13.33%, pointing to higher personal care-related costs. Kenanga maintained its 2026 inflation forecast for Indonesia at 2.5%, compared with an estimated 1.9% in 2025, citing fading low base effects, festive demand and potential weather-related food price volatility. The firm said near-term monetary easing is constrained by inflation risks and a fragile rupiah amid global uncertainty and geopolitical tensions. However, Indonesia’s 5.4% growth target for 2026 supports further accommodation, with Kenanga expecting two rate cuts in the first half of 2026, subject to rupiah stabilisation.

THE PHILIPPINES
Bangko Sentral ng Pilipinas signals one final policy rate cut in 2026
(06 January 2026) The Bangko Sentral ng Pilipinas signalled that it may deliver one final policy rate cut this year, possibly in February, to conclude its easing cycle. The central bank said the policy rate is “very close” to the desired level and that any additional easing would be limited and dependent on incoming data, a view echoed by the Monetary Board in a separate statement. The guidance follows a rise in headline inflation to 1.8% year on year in December, above the Bloomberg median estimate of 1.4%, driven by typhoon-related disruptions that lifted vegetable and fish prices, according to the Economic Planning department. The central bank expects inflation to edge up this year but remain within the 2%–4% target range. The BSP said the economic outlook has weakened, but domestic demand is expected to recover gradually as lower interest rates take effect and public spending improves. The central bank estimates GDP growth at 4.6% in 2025, improving to 5.4% in 2026. The central bank added that if growth in 2026 falls below 5%, there may be justification for an additional rate cut beyond the 25 basis points currently priced in by markets.

SINGAPORE
Economy grows 4.8% in 2025 in strongest performance since 2021
(06 January 2026) Singapore’s economy grew 4.8% in 2025, exceeding the government’s 4% forecast and marking its strongest performance since 2021, supported by AI-driven electronics demand and trade front-loading amid US tariff uncertainty. The World Trade Organization revised its 2025 global merchandise trade growth estimate up to 2.4% from an earlier forecast of contraction, while Singapore recorded growth of 4% and above for a second consecutive year. Fourth-quarter 2025 GDP expanded 5.7% year-on-year, up from 4.3% in the third quarter. Non-oil domestic exports rose 11.6% year-on-year in November, beating the 6.8% consensus forecast and marking a second month of double-digit growth. For 2026, the WTO forecasts global goods trade growth of 0.5%, reflecting the delayed impact of US tariffs agreed and implemented in the second half of last year, while the IMF projects global growth of 3.1% versus 3.2% previously. Singapore’s government has set a 2026 growth forecast of 1% to 3%, with HSBC and OCBC projecting 2%, Oxford Economics 3.8%, and Nomura 3.7%. HSBC said electronics manufacturing led growth in the third quarter while pharmaceuticals were subdued, supported by diversification including double-digit growth in transport engineering. Singapore’s exposure to a 10% baseline US reciprocal tariff, lower than most Asian peers, is expected to attract trade diversion and foreign investment, with Asean-6 accounting for 14.5% of global FDI and 65% of that flowing to Singapore. Maybank cited continued deepening of Singapore’s AI supply chain in 2026 with the opening of Micron’s SGD 8.9 billion advanced packaging facility and UMC’s SGD 6.5 billion wafer plant. Analysts expect AI investment momentum to moderate but persist, supporting exports, infocomm services, and investment inflows, alongside construction and modern services, to underpin economic resilience despite slower global trade growth.

LAO PDR
Lao PDR records year-on-year inflation rate of 5.6% in December 2025
(05 January 2026) Lao PDR recorded a year-on-year inflation rate of 5.6% in December 2025, according to the Consumer Price Index released by the Ministry of Finance’s Lao Statistics Bureau, with prices falling 0.3% month-on-month for a second consecutive month. Housing, water, electricity and cooking fuel prices rose 18.1% over 2025, led by a 105.0% increase in electricity tariffs and a 40.1% rise in water charges. Healthcare inflation reached 14.4%, with hospital services up 26.4% and pharmaceutical products up 13.8%, while education prices increased 11.4%, including a 19.2% rise in supplementary tutoring fees. Clothing and footwear prices rose 8.1%, with women’s clothing increasing 25.2%, partly linked to appreciation of the Thai baht affecting imported goods. Miscellaneous goods and services recorded the largest annual increase at 29.2%, driven by a 58.8% surge in jewellery and gold accessory prices. In December, food and non-alcoholic beverage prices declined 0.8% month-on-month, led by sharp falls in vegetable prices, including shallots down 35.4%, coriander down 29.6% and cucumbers down 16.4%. Transport costs eased 0.6% month-on-month as fuel prices fell 3.7%, while housing-related costs rose 0.6% and electricity bills increased 1.6% during the month. Core inflation for 2025 was reported at 6.9%, compared with non-core inflation of 4.2%. Prices of domestically produced goods increased 6.5% year-on-year, outpacing a 3.8% rise in imported goods. The LSB noted that although inflation moderated from levels above 15% earlier in 2025, elevated utility costs remain a significant burden on households and businesses.

RCEP Monitor

AUSTRALIA
Consumer prices rise 3.4% year-on-year in November 2025, down from 3.8% in October
(07 January 2026) Australian consumer prices rose 3.4% year on year in November, below the 3.6% market expectation and down from 3.8% in October, according to Australian Bureau of Statistics data. The lower reading reduced near-term expectations of a Reserve Bank of Australia rate hike, with markets pricing a two-thirds probability of rates remaining on hold at the February meeting. Following the release, the Australian dollar weakened from 67.38 US cents to 67.24, while the ASX200 rose from 8,700 to 8,734 points. Despite the moderation, NAB economists maintained forecasts for rate increases in February and May, while markets continue to expect a first hike by June and potentially a second before December. Deloitte Access Economics said a February hike would be premature given uncertainty over the recent inflation resurgence. ANZ economists described the February decision as finely balanced, citing easing prices in some categories. Clothing and footwear prices fell 3.1% month on month in November, while furniture prices declined 4.6% amid Black Friday discounting. Domestic holiday prices dropped 4.1% and international holiday prices fell 0.6%, while health costs declined 0.5% following expanded bulk-billing incentives from 01 November 2025. Housing costs increased 1.1% month on month and 5.2% year on year, driven by higher rents, new home construction costs and a 19.7% rise in electricity prices as rebates expired. Food prices rose 3.3% annually, with meals out and takeaway up 3.5% and meat and seafood up 3.9%. EY said inflation is likely to remain elevated in forthcoming December quarter data and that interest rates will need to be lifted in the first half of 2026 to return inflation towards the target midpoint.

JAPAN
Japanese equities show resilience despite rising geopolitical tensions with China
(07 January 2025) Japanese equities showed resilience despite rising geopolitical tensions with China, with the Topix index falling about 1% after China imposed export controls on items with potential military use and signalled possible tighter restrictions on rare earth sales, while more than half of Topix constituents advanced. The decline followed a strong start to the year, with the Topix and Nikkei 225 rising for two consecutive sessions and both reaching record highs on 06 January, according to Bloomberg-compiled data. Market participants characterised the sell-off as a buying opportunity, with Rayliant Global Advisors stating expectations that tensions would not escalate into a broader market risk. Sector performance diverged, as the Topix Transport Equipment Index fell up to 2.5%, reflecting concerns over supply chain disruption given China’s dominance in rare earths critical for electric vehicles. H Capital warned of continued pricing volatility in electronics and automotive sectors reliant on rare earth inputs. In contrast, Toyo Engineering Corp surged 20% on expectations of increased demand for technologies enabling rare earth recovery and supply chain diversification. Japanese brokerage chief executives continue to forecast a strong year for equities following a more than 20% gain in the Topix in 2025. Goldman Sachs strategists lowered their rating on Japan while maintaining a constructive view on alpha opportunities. Pepperstone Group described the market reaction as a short-term disruption rather than a structural shift, citing supportive global liquidity and relatively attractive valuations.

CHINA, JAPAN
China mulls tightening licensing controls on rare earth exports to Japan
(07 January 2026) China is considering tighter licensing controls on rare earth exports to Japan, according to a China Daily report citing an unidentified source, as bilateral tensions escalate following remarks by Japan’s Prime Minister on Taiwan. The potential measures would cover the same seven rare earth elements that China restricted in April in response to the US-led trade conflict. The report followed an official Chinese announcement banning sales of more than 800 dual-use items to the Japanese military or end-users supporting military capabilities, a category that typically includes rare earths. Heavy rare earths such as dysprosium and terbium remain a key vulnerability for Japan, as they are essential for high-performance magnets and supply is still almost entirely dependent on China. Japan has reduced overall reliance on China for the full suite of 17 rare earths to about 60% in 2024 from 80–90%, supported by government and industry backing for Australia’s Lynas Rare Earths Ltd. Lynas began shipping limited volumes of heavy rare earths to Japanese customers late last year. Shares in Lynas rose as much as 16% in Sydney following the report. Despite progress since China’s 2010 export ban, the episode highlights ongoing exposure in sectors reliant on rare-earth magnets, although Japan has expanded domestic magnet production, encouraged stockpiling and pursued material substitution to mitigate disruption risks.

THAILAND
Thailand records 32.6 million foreign tourist arrivals as of 28 December
(30 December 2025) Thailand recorded 32.6 million foreign tourist arrivals as of 28 December, according to the Ministry of Tourism and Sports, representing a decline of more than 7% from the same period last year and putting the country on track for its first annual fall in arrivals outside the pandemic in a decade. Safety concerns following the abduction of Chinese actor Wang Xing, a major earthquake in Myanmar, a border conflict with Cambodia, severe flooding in southern Thailand and a domestic political transition weakened traveller confidence during the year. The baht appreciated about 8%, increasing relative travel costs compared with regional competitors such as Indonesia, where the rupiah fell 4%. The Association of Thai Travel Agents cited safety concerns and currency strength as the main factors affecting arrivals. Full-year international arrivals are expected to reach 32.8 million, generating THB 1.52 trillion in revenue, down from 35.5 million visitors and THB 1.67 trillion in 2024. Tourism revenue from foreign visitors totalled THB 1.5 trillion as of 28 December. Malaysians were the largest visitor group with 4.5 million arrivals, followed by 4.4 million Chinese and 2.5 million Indian tourists. The tourism authority is targeting 36.7 million foreign visitors in 2026, with short-haul markets expected to account for over 70% of arrivals and Chinese tourists projected at 6.7 million. Arrivals could reach 38 million next year if Chinese visitor numbers recover to 8 or 9 million and authorities manage border tensions and currency pressures.

ASEAN
Economic costs of lung diseases in Southeast Asia to reach USD 584 billion by 2050
(29 December 2025) Chronic respiratory diseases are increasing across Asia, with chronic obstructive pulmonary disease rising from the seventh to the fourth leading cause of death in Southeast Asia between 2000 and the present, according to a recent World Health Organization report. The WHO estimates the economic cost of these diseases to the region will reach USD 584 billion by 2050 due to healthcare strain and productivity losses. WHO director-general’s special envoy for chronic respiratory diseases stated during a visit to Malaysia that these non-communicable diseases are under-prioritised despite causing significant economic and social losses. Chronic respiratory diseases, including asthma, lung cancer and COPD, are driven by smoking, air pollution and chemical exposure, and reduce life expectancy by up to three years in the most polluted areas of Southeast Asia. Earlier this year, nine of the world’s ten most polluted cities were in Asia, including Dhaka, Karachi, Kathmandu, Hanoi and Bangkok, while Myanmar and Indonesia rank among the five countries with the highest smoking prevalence globally. Economic impacts cited by academics include air pollution reducing Thailand’s GDP by an estimated 6% between 2020 and 2025, asthma costing Viet Nam VND 422 billion, and COPD generating projected costs of IDR 1,499 trillion in Indonesia. Malaysia led the adoption of an Integrated Lung Health Resolution at the World Health Assembly this year, mandating prioritisation of lung health and policy action to reduce exposure to polluted air and second-hand smoke. Experts cited declines in pollution-related deaths in Beijing following clean air policies and benefits from tobacco control in Thailand, noting that most countries in the region lack comparable measures. He also called for increased investment in diagnostics, treatment and screening, as most lung cancer cases in Malaysia are diagnosed at stage four or five, according to the Lung Cancer Network. Diagnostic capacity remains limited, with only 27% of public health facilities in middle-income countries having access to spirometers and 34% able to supply WHO-recommended asthma inhalers, constraining effective disease management.

MALAYSIA
Malaysia records MYR 54.13 billion in digital investments in third quarter of 2025
(31 December 2025) Malaysia approved MYR 54.13 billion in digital investments in the third quarter of 2025, generating 21,815 high-value jobs across 402 digital companies, according to the Malaysia Digital Economy Corporation. Singapore-based investors accounted for MYR 25.1 billion of the approved investments, followed by Malaysian investors with MYR 17.2 billion, the United States with MYR 6.4 billion and China with MYR 3 billion. Artificial intelligence-related investments generated 8,328 jobs, representing 38% of total projected employment, indicating rising demand for digital professionals, data scientists, AI engineers, and specialised services talent. Kuala Lumpur and Selangor attracted 88% of total approved digital investments, valued at MYR 47.8 billion, and nearly 90% of the 19,417 digital jobs created, maintaining the Klang Valley as the primary investment destination. Malaysia’s Digital Minister said the investment inflows demonstrate Malaysia’s intent to advance from a technology consumer to an AI solutions creator, supported by digital infrastructure, skilled talent and international collaboration. MDEC said Malaysia’s positioning as an ASEAN digital hub, combined with a skilled workforce and targeted incentives, continues to draw domestic and foreign AI-focused investments.

MALAYSIA, THAILAND
Cross-border consumer demand and infrastructure projects to boost Thai-Malaysia economic ties
(31 December 2025) Cross-border consumer demand and infrastructure plans are shaping Malaysia–Thailand economic cooperation, highlighted by Thai halal snack producers reporting strong purchases by Malaysian consumers in southern Thai border towns within one month of distribution. Business operators cited the existing Sungai Golok–Rantau Panjang link as a key logistics route, with expectations that a planned second six-lane bridge will improve traffic flow and trade. Malaysia and Thailand committed in December 2024 to raise bilateral trade and investment to USD 30 billion by 2027, following talks between Malaysian Prime Minister Anwar Ibrahim and former Thai premier Paetongtarn Shinawatra. Bilateral trade reached USD 18.64 billion from January to August 2025, compared with USD 25.03 billion in 2024, with Thailand ranked as Malaysia’s seventh-largest trading partner and third within ASEAN. Both countries launched a twin-city project pairing five southern Thai provinces with five northern Malaysian states to boost agricultural, tourism, halal, and digital sector links. Transport initiatives include reviving the Bangkok–Butterworth rail service and discussions on extending Malaysia’s East Coast Rail Link to Thailand via Rantau Panjang and Sungai Golok. A second 117.3-metre bridge at Rantau Panjang–Sungai Golok, estimated to cost MYR 40.54 million and targeted for completion by 2028, is expected to separate inbound and outbound traffic and ease congestion at the busiest Kelantan–Narathiwat checkpoint, which handled about 3 million crossings in 2024. Thai officials said inbound visitors have exceeded pre-pandemic levels, while customs data show two-way trade in timber, seafood, dairy, vegetables, and construction materials. Security incidents in southern Thailand, including attacks and robberies linked to insurgent groups, have periodically reduced tourism and trade flows and prompted Malaysian travel advisories, affecting local business confidence. Malaysian authorities confirmed there are currently no plans for a Malaysia–Thailand border special economic zone, citing existing regional frameworks, while remaining open to future consideration if mutual benefits arise. Analysts and officials said political instability and security risks in Thailand’s southern provinces continue to constrain investment decisions despite ongoing bilateral talks and connectivity projects.

VIET NAM
Vietnamese lenders face liquidity shortages after bank lending rose 19.4% year-on-year as of 24 December
(29 December 20205) Viet Nam’s central bank warned that some lenders are facing liquidity shortages after bank lending rose 19.4% year on year as of 24 December, exceeding the full-year target of 16% and outpacing deposit growth. The head of monetary policy at the State Bank of Vietnam said most loans rely on short-term funding, increasing pressure on interest rates and bank liquidity. The central bank said it will continue flexible monetary policies to support lending and businesses, while acting cautiously due to elevated credit growth. Authorities had pushed banks to expand lending to support the export-driven economy and the government’s growth objective of 10% next year. Credit to the technology sector increased by just over 30% in 2025, up from about 25% growth in the first nine months. The deputy governor said external risks, including US tariffs, Federal Reserve rate cuts and geopolitical uncertainty, will complicate economic management. The prime minister has instructed the central bank to draft a roadmap to abolish annual credit growth quotas starting next year to support a target of at least 10% annual growth over the next five years. Viet Nam’s economy expanded 8.2% in the last quarter, the fastest in three years, driven by increased exports to the US ahead of higher tariffs in early August. The central bank also said it has received nine applications for gold bar production licences following the end of its long-standing monopoly on bullion trading and production.

VIET NAM
Ho Chi Minh City is intensifying efforts to expand exports to Halal market
(30 December 2025) Ho Chi Minh City is intensifying efforts to expand exports to the Halal market to help businesses diversify amid rising tariff tensions and tighter standards in traditional markets. The Halal market serves about 2.2 billion Muslim consumers globally and is forecast to reach an economic scale of USD 10 trillion before 2028. The Middle East, with annual merchandise imports exceeding USD 1.2 trillion and average GDP growth of five to six percent, has been identified as a priority growth market. In the first 11 months of 2025, Viet Nam’s exports to the United Arab Emirates reached USD 5.4 billion and to Saudi Arabia USD 1.9 billion. High-tech products, including mobile phones and components, accounted for nearly 35% of export value, alongside electronics, footwear, textiles, garments, seafood, cashew nuts, vehicles and agricultural products. Authorities said export potential between Ho Chi Minh City and Middle Eastern markets remains underexploited despite interest from regional retailers such as Lulu Hypermarket and Al Othaim Markets. The director of the Ho Chi Minh City Investment and Trade Promotion Centre said the city is developing a Halal ecosystem as a strategic priority to deepen integration into global value chains. In 2025, ITPC organised more than 160 trade and investment promotion activities, including targeted programmes for Halal markets focused on supply-demand matching and supply chain connectivity. The Halal food sector is projected to grow from more than USD 2.71 trillion in 2024 to over USD 5.91 trillion by 2033 at an average annual rate of about 9%. The Ministry of Foreign Affairs said Ho Chi Minh City should enhance cooperation with Middle Eastern partners, introduce supportive tax and financing policies, and encourage participation in major Halal trade exhibitions to secure long-term export contracts.

INDONESIA
Trade surplus expected to widen to USD 3.06 billion in November from USD 2.4 billion in October
(31 December 2025) Indonesia’s trade surplus is expected to widen to about USD 3.06 billion in November from USD 2.4 billion in October, according to a Reuters poll of 15 economists. Exports are forecast to contract by 0.53% year on year, an improvement from the 2.31% decline recorded in October. Imports are expected to rise by 3.2% after shrinking 1.15% in the previous month. Statistics Indonesia is scheduled to release the official trade figures on 05 January alongside December inflation and other economic data. Earlier in 2025, exports were supported by frontloaded shipments ahead of US tariff implementation in August. Export performance weakened in October due to softer demand from China and lower shipments of coal and copper. Import activity has remained subdued amid weak domestic demand and a depreciating rupiah. The rupiah has fallen more than 3% against the US dollar this year, increasing import costs. Economists also expect annual inflation to remain broadly stable at 2.73% in December, within the central bank’s 1.5% to 3.5% target range for 2025.

RCEP Monitor

CHINA
Two Chinese flagship exchange-traded funds launched in Thailand
(29 December 2025) China Asset Management Co. said it launched two flagship exchange-traded funds in Thailand, providing Thai investors with access to Chinese blue-chip and technology stocks. The products track the CSI300 Index and the STAR 50 Index and were issued as depository receipts listed on the Stock Exchange of Thailand. ChinaAMC stated the launch supports cross-border investment flows and reflects strong local demand for Chinese equities and technology exposure. Thai securities firm InnovestX Securities partnered on the transaction and managed the depository receipt issuance and market-making. The CSI300 Index has risen about 18% year to date following a 15% increase in 2024. The STAR 50 Index has gained 36% so far this year, driven by sectors including semiconductors, biotechnology and high-end manufacturing. ChinaAMC said Thai investors can trade the products in real time during local market hours using baht without opening overseas accounts and with capital gains tax exemptions. The firm said the launch aligns with broader capital market opening efforts and China–Thailand financial cooperation. In September, ChinaAMC and U.S. investment adviser Rayliant launched a Nasdaq-listed ETF focused on Chinese companies in transformative technologies. ChinaAMC has also obtained a mandate to manage a Thailand-domiciled fund investing in leading Chinese companies with international operations.

SOUTH KOREA
Consumer inflation slows to 2.1% in 2025 from 2.3% in 2024
(31 December 2025) South Korea’s consumer inflation slowed to 2.1% in 2025 from 2.3% in 2024, according to official data, aligning closely with the Bank of Korea’s 2% target. The data supports expectations that the central bank may maintain interest rates at current levels for an extended period. The Bank of Korea kept its policy rate unchanged at 2.50% on 27 November for a fourth consecutive meeting and indicated it may be approaching the end of its rate cut cycle. In December, the consumer price index increased 2.3% year on year, matching median market forecasts. On a month-on-month basis, consumer prices rose 0.3%, exceeding economists’ expectations of a 0.2% increase.

CHINA
China on track to meet its 2025 economic targets, with growth expected at 5%
(31 December 2025) President Xi Jinping said China is on track to meet its 2025 economic targets, with growth expected at about 5%, citing resilience despite domestic and external pressures. His remarks coincided with official data showing the manufacturing purchasing managers’ index rose to 50.1 in December from 49.2 in November, marking the first expansion in nine months and ending an eight-month contraction. A separate private survey also showed manufacturing activity moving above the 50 threshold. The improvement supported Beijing’s gradual approach to stimulus, with policymakers indicating no immediate need for large-scale support while external demand remains firm. Market reaction included a decline of up to 0.8% in China’s 30-year bond futures and higher cash-market yields as investors reduced demand for safe assets. Recent policy measures include CYN 62.5 billion in consumer subsidies for 2026, an extension of tax breaks on eligible home sales, and the front-loading of CYN 295 billion for key projects, signalling limited urgency for major stimulus. The People’s Bank of China cut policy rates only once in 2025, maintaining a conservative stance. National Bureau of Statistics data showed production and demand expanding, with 16 of 21 industries improving and high-tech manufacturing PMI rising to 52.5. However, the non-manufacturing index rose only marginally to 50.2, while services activity contracted for a second consecutive month. Input costs exceeded output prices, with sub-indexes at 53.1 and 48.9 respectively, indicating margin pressure for manufacturers. Broader indicators showed continued weakness in investment, consumer spending and the property sector, underscoring fragile domestic demand despite manufacturing stabilisation.

ASEAN
Southeast Asia records faster export growth to the US than China amid global trade disruptions
(10 December 2025) Southeast Asia has recorded faster export growth to the US than China amid global trade disruption, according to a Lowy Institute analysis. Exports from the Association of Southeast Asian Nations, comprising 11 countries, to the US increased by 23% year on year in September, with Thailand and Vietnam identified as leading contributors. The Lowy report stated that China’s share of US imports has declined over the same period. The analysis attributed part of the shift to tariff differentials, with the effective US tariff rate on China at 31% compared with about 11% for many ASEAN economies. The report noted that earlier concerns that US punitive duties and weaker Chinese demand would damage Southeast Asia’s export-led growth had not materialised as expected. Instead, exports to the US expanded as Southeast Asian goods substituted for Chinese products in the American market. Exports to other markets were also reported to be growing, despite prior expectations that they would be displaced by lower-priced Chinese goods. Lowy said Southeast Asia remains diversified in its trade structure and geopolitically aligned with the US, supporting its positioning as an alternative supply base to China. The economists concluded that the region’s openness and competitiveness have strengthened its capacity to manage ongoing trade and geo-economic uncertainty.

MALAYSIA
Gaza-linked boycott campaign accelerates growth of domestic food and beverage chains
(15 December 2025) Consumer boycotts of US-linked brands in Malaysia following the Gaza conflict have accelerated the growth of domestic food and beverage chains, according to examples cited in the article. Ahmad’s Fried Chicken expanded from a food truck to 35 outlets in just over one year and plans to reach about 110 outlets by end-2026. The business generates around MYR 3 million in monthly sales from an initial MYR 700,000 investment for its first physical outlet opened in December 2024. Malaysian coffee chain Zus Coffee doubled its store count in 2024 as Starbucks’ footprint contracted and now operates more than 700 outlets nationwide. Zus Coffee has expanded outside Malaysia since late 2023, opening stores in the Philippines, Thailand, Singapore, and Brunei Darussalam, and localising products such as ube-flavoured drinks in the Philippines. Viewfinder Global Affairs described the consumer shift towards local brands as permanent. Malaysia’s food-service industry is projected by Mordor Intelligence to grow to USD 27.5 billion by 2030, compared with more than USD 1.5 trillion in the US. Analysts cautioned that some local brands may face resource constraints as expansion continues. Berjaya Food has stated that Starbucks Malaysia remains confident in the brand despite store closures and losses, noting that business is gradually recovering. The article indicates that once consumers switch to local alternatives, many report no intention of returning to international brands.

MALAYSIA
Malaysian ringgit on track to outperform other Asian currencies for second consecutive year
(15 December 2025) The Malaysian ringgit is on track to outperform other Asian currencies for a second consecutive year, with several strategists projecting further gains into 2026. Strategists from Bank of Singapore and MUFG Bank expect the ringgit to trade near 4.00 per US dollar by end-2026, while Goldman Sachs forecasts appreciation to 3.95, the strongest level in seven years. The currency has strengthened by more than 9% against the dollar this year and was last quoted at 4.0982 on Monday after two sessions of gains. Analysts cited Malaysia’s role in the global technology supply chain, rising artificial intelligence-related demand and increased foreign direct investment, particularly into data centres, as key drivers. Bank Negara Malaysia is expected to maintain a stable policy stance, with Goldman Sachs noting limited scope for further easing, which may narrow yield differentials even as the US Federal Reserve signals one more rate cut in 2026. Central bank data showed data-centre export services rose to MYR 10.7 billion in the first nine months of the year from MYR 1.2 billion in the same period of 2024. Goldman Sachs strategists said valuation models indicate the ringgit remains significantly undervalued. Technical indicators show the dollar-ringgit pair has breached support at 4.0947, the September 2024 low, suggesting a move towards 4.00. Malaysia’s trade data scheduled for release on 19 December is identified as a potential near-term catalyst if it confirms continued strength in technology exports.

INDONESIA, UNITED STATES
Indonesia expects trade agreement with the US to be concluded by year-end
(12 December 2025) Indonesia expects to conclude a trade agreement with the US by the year’s end, and will send a delegation to Washington next week to finalise outstanding issues. Indonesia’s Coordinating Minister for Economic Affairs said discussions aim to complete commitments agreed by the leaders on 22 July, following his call with the US Trade Representative. The July trade framework provides for Indonesia to eliminate tariffs on more than 99% of US goods and remove non-tariff barriers. In return, the US would cut tariffs on Indonesian exports from a proposed 32% to 19%. US officials have accused Indonesia of backtracking on elements of the agreement, while Jakarta has resisted US demands it views as undermining policy independence, particularly in critical minerals and energy. Indonesia has objected to provisions allowing the US to revoke the deal if Jakarta signs agreements considered harmful to US interests. The minister said those provisions would not apply to Indonesia and that the issue would be resolved in the upcoming talks. PT Bank Maybank Indonesia said the completion of the agreement would provide positive sentiment for foreign investors.

INDONESIA
Employer’s association claims proposed provincial minimum wage rise is too high
(17 December 2025) Indonesia’s provincial minimum wages are set to rise by between 5.3% and 7.3% next year under a new government regulation, according to an official from the employers’ association APINDO. The manpower ministry on Tuesday introduced a revised wage-setting formula incorporating inflation, economic growth and labour’s contribution to growth. APINDO said the proposed increases were too high and that many companies were unable to meet this year’s minimum wage levels. Under the new rule, provincial governors have until 24 December to determine the 2026 minimum wage increases for their respective regions. The Labour Party, representing unions, had sought a minimum increase of 6.5% in line with this year’s economic growth. The Labour Party said the party would issue its formal response to the new pay regulation later on Wednesday.

SINGAPORE
Singapore’s non-oil domestic exports increase by 11.6% year-on-year in November
(17 December 2025) Singapore’s non-oil domestic exports increased by 11.6% year on year in November, exceeding the Reuters poll forecast of 7.0%, according to government data released on Wednesday. The expansion followed a revised 21.7% rise in October. Growth was led by pharmaceuticals and supported by electronics, including integrated circuits and personal computers. Enterprise Singapore reported strong export gains to the US, the European Union and Taiwan. Shipments to Thailand and Japan declined compared with a year earlier. In November, Enterprise Singapore narrowed its 2025 non-oil domestic exports growth forecast to around 2.5% from a previous range of 1% to 3%. The agency cited expected support from artificial intelligence-related demand and elevated gold prices in the fourth quarter. The Trade Ministry expects Singapore’s GDP growth to be around 4.0% this year.

VIET NAM
Viet Nam projected to receive record 21 million foreign tourists in 2025
(16 December 2025) Viet Nam is projected to receive a record 21 million foreign tourists this year, surpassing the pre-pandemic peak of 18 million recorded in 2019, according to the Ministry of Culture, Sports and Tourism. The ministry said foreign arrivals are up 19.3% year on year, and the country marked the arrival of its 20 millionth international visitor on Monday at a ceremony on Phu Quoc Island. The rebound follows a low of fewer than 160,000 foreign arrivals in 2021 during COVID-19 travel restrictions. Data from the National Statistics Office showed China was the largest source market in the first 11 months, accounting for about 25 percent of total arrivals. Other key source markets included South Korea, Taiwan, the United States and Japan. The ministry acknowledged ongoing challenges from severe air pollution, with Hanoi ranking among the world’s most polluted cities at times this year, and flooding affecting destinations such as Hue, Hoi An and Nha Trang.

RCEP Monitor

SOUTH KOREA, UNITED KINGDOM
South Korea and the UK finalize trade agreement extending tariff-free arrangements
(16 December 2025) The UK and South Korea have finalised a trade agreement extending existing tariff-free arrangements and preventing the expiry of provisions due in January 2026. The deal maintains tariff-free treatment on 98% of bilateral trade, matching the terms South Korea has with the EU, and is intended to protect GBP 2 billion of UK exports from higher tariffs. UK government statements said the agreement would support exports including Bentley vehicles, Scottish salmon and Guinness canned in Britain. South Korea is the UK’s 25th largest trading partner, accounting for 0.8% of total UK trade in the 12 months to end-June. Over the same period, UK exports to South Korea fell 16.4% and South Korean exports to the UK declined 10.8%, according to official figures. South Korea’s trade minister said the agreement focuses on reducing non-tariff barriers, including more business-friendly rules of origin, and adding digital and investment protections. The UK government described the deal as its fourth trade agreement since Labour took office, following deals with the EU, the US and India. The Office for Budget Responsibility has previously assessed that post-Brexit trade deals are unlikely to have a measurable impact on UK economic growth by 2030. The government has said the agreements will support jobs and reduce red tape for small businesses, although its own assessment showed the India deal would raise GDP by 0.11% to 0.14%. UK companies including Bentley Motors and Diageo welcomed the South Korea agreement, citing improved market access and demand growth.

JAPAN
Exports rise 6.1% year-on-year in November 2025, fastest pace in nine months
(16 December 2025) Japan’s exports rose 6.1% year on year in November, the fastest pace in nine months, according to finance ministry data released on Wednesday. The increase exceeded the Reuters poll forecast of 4.8% and accelerated from 3.6% in October. Shipments to Western Europe surged 23.6%, while exports to the US increased 8.8%, marking the first rise since March. Automobile exports declined 4.1% by value, although auto shipments to the US recovered with a 1.5% year-on-year increase. Exports to mainland China fell 2.4%, with foodstuff exports to China down 5.9%, while shipments to Hong Kong rose 11.4%. The data followed revised third-quarter GDP figures showing a deeper contraction of 0.6% quarter on quarter, or 2.3% on an annualised basis. Imports increased 1.3% in November, below expectations of a 2.5% rise. Tensions with China escalated in November after Prime Minister Sanae Takaichi said a Chinese attempt to seize Taiwan by force could prompt Japanese military intervention, after which Beijing restricted imports of Japanese seafood. The Bank of Japan’s Tankan survey showed business sentiment improved in the fourth quarter, particularly among small manufacturers. Monex Group highlighted strength in semiconductor and equipment exports linked to US-led technology investment. Exports of electrical machinery rose 7.4% and semiconductor-related exports increased 13% year on year, supporting Japan’s position in specialised manufacturing equipment.

NEW ZEALAND
Reserve Bank of New Zealand to ease some capital requirements for banks
(17 December 2025) New Zealand’s central bank has decided to ease some capital requirements for banks following a review of rules introduced in 2019, while keeping standards above international norms. The Reserve Bank of New Zealand said the four largest Australian-owned banks must hold common equity tier 1 capital of 12%, down from 16%, while tier 2 capital requirements will rise to 3% from 2% and internal loss-absorbing capacity will be set at 6%. Total capital requirements for smaller banks will be reduced to 14% from 16%, with the central bank describing the revised settings as relatively conservative by global standards. The central bank’s governor said the changes are expected to lower funding costs and support increased lending and lower interest rates. The central bank estimated average funding costs would fall by 12 basis points, generating an annual net benefit equivalent to 0.12% of GDP compared with full implementation of the previous rules. The original capital framework, announced in 2019, was due to be fully implemented by 2028 but was reviewed after criticism that it was pushing up borrowing costs and weighing on economic growth. The banking sector is dominated by Westpac, ASB Bank, Bank of New Zealand and ANZ, all Australian-owned. The New Zealand Banking Association said the impact would vary across banks depending on size and existing capital positions. The Cooperative Bank said the changes would help address challenges faced by smaller lenders and support competition. The Reserve Bank will publish further details in February and consult on specific requirements, with full implementation still expected by 2028.

MALAYSIA, CHINA
China proposes new trade MoU with Malaysia in wake of US trade agreement
(03 December 2025) Malaysia is considering a new China-proposed trade MoU covering strategic sectors after Beijing raised concerns on 25 November over Malaysia’s 26 October US-Malaysia Agreement on Reciprocal Trade (ART) signed during President Trump’s visit. Malaysia’s trade minister stated on 02 December that discussions on the proposed MoU remain preliminary and will focus on investment flows and strategic sectors. “Strategic sectors” typically refer to tech supply chains, including semiconductors and rare earths. The minister said Malaysia’s team met Chinese officials in Beijing last week to clarify the wording of the ART, with Malaysian officials claiming that China was satisfied with their explanations. China’s concerns centre on ART clauses requiring Malaysia to align with US national security restrictions, including abiding by US controls on sensitive technologies and preventing circumvention by third countries. China has issued similar warnings to Cambodia and is expected to have expressed their concerns to Indonesia, Thailand and Viet Nam on their ongoing US negotiations. Chinese exports to Malaysia rose 3.6% in the first ten months of 2025, while shipments to Southeast Asia rose 14.3% and exports to the US fell 17.8%. Viet Nam and Thailand have adopted frameworks towards ARTs, while Indonesia is resisting US demands seen as onerous, including a demand to avoid using Chinese carriers when shipping to the US. Malaysia’s ART locks in a 19% tariff rate and includes concessions such as a commitment not to restrict critical mineral supplies to the US.

RCEP Monitor

AUSTRALIA
Beef exports hit record high despite earlier Trump tariffs
(05 December 2025) Australia’s beef exports reached 1.4 million tons in the first 11 months of the year, up 15% from the same period in 2024 and exceeding the previous full-year record of 1.34 million tons. The US remained the largest market, taking almost one-third of shipments, with exports to the US rising 17% year-on-year to 412,000 tons despite a 10% tariff imposed earlier by the Trump administration that has since been removed. Meat & Livestock Australia (MLA) attributed the sustained US demand to historically low American cattle herd numbers and reduced domestic beef production. Exports to China increased 43% to 243,000 tons, and shipments to Japan and South Korea also grew. MLA noted that Australian beef production is expected to reach a new record in 2025, even with smaller herds in southeastern states due to prolonged drought. The organisation added that global beef demand continues to strengthen and said Australia is positioned to benefit from this trend into 2026.

JAPAN
Japan mulls enhancing oversight of regional lenders that receive public funding
(05 December 2025) Japan’s Financial System Council has approved a draft report proposing stronger oversight of regional lenders that have received public funds, following the discovery that Iwaki Shinkumi Bank in Fukushima provided financing to antisocial groups. The bank had been recapitalised with JPY 20 billion in taxpayer money in 2012 after the 2011 earthquake and tsunami. The draft report outlines measures to reinforce the functions of regional financial institutions, with enhanced monitoring focused on banks supported through public funds. The government also plans to increase grants for local bank mergers to promote further consolidation within the regional banking sector.

SOUTH KOREA
President Lee Jae-Myung using strong approval ratings to advance investor-focused reforms
(05 December 2025) South Korean President Lee Jae Myung has consolidated domestic and international stability a year after the failed martial-law attempt by his predecessor, and is using strong approval ratings of 60% or higher to advance investor-focused reforms. He has secured concessions from US President Donald Trump, addressed labour-related tensions in Georgia, and negotiated a trade and investment deal that contributed to higher consumer confidence and a Bank of Korea upgrade of the 2026 growth outlook to 1.8% from 1.6%. The Democratic Party has revised the Commercial Act twice to enhance shareholder rights and is pursuing a further amendment requiring the cancellation of treasury shares, contributing to a 68% rise in the Kospi index from around 2,400 and supporting Lee’s target of 5,000. Concerns persist over rising property prices, with Seoul apartment prices increasing for a 44th consecutive week to 1 December, prompting Lee to label the market a “ticking bomb” ahead of June local elections. Lee has proposed constitutional reform to allow two consecutive four-year presidential terms, though no concrete steps have been taken. His AI-focused industrial strategy includes tripling AI-related investment to KRW 10.1 trillion, raising questions about dependence on the semiconductor cycle.

ASEAN
Several Southeast Asian countries impacted by severe flooding
(26 November 2025) Parts of southern Thailand have recorded record flooding over the past week, resulting in at least 33 deaths and affecting more than 2 million people. Hat Yai city reported 335mm of rainfall in a single day, described as its heaviest in 300 years, leaving vehicles and homes submerged and residents stranded on rooftops. Only 13,000 people have been moved to shelters, with the majority cut off from assistance. The Thai military has assumed operational control and is preparing to deploy an aircraft carrier, 14 boats carrying relief supplies, and field kitchens capable of producing 3,000 meals per day. The navy stated that the aircraft carrier could be converted into a floating hospital if required. Additional evacuation assets, including boats, high-clearance trucks and jet skis, have been deployed in Songkhla province. The cabinet has designated Songkhla a disaster zone to release relief funding. Regional impacts include 98 deaths in Viet Nam, more than 19,000 evacuees in Malaysia, and at least 19 deaths with seven missing following landslides in North Sumatra, according to the Indonesian National Search and Rescue Agency. A Thai volunteer group, the Matchima Rescue Center, reported receiving thousands of evacuation requests over the past three days.

CHINA, MALAYSIA, CAMBODIA|
China raises formal concerns with Malaysia and Cambodia on US trade deals
(28 November 2025) China raised formal concerns with Malaysia on 25 November regarding portions of the US–Malaysia trade agreement signed in October, stating it has “grave concerns” and urging Malaysia to handle the matter in line with its long-term interests. Chinese officials received clarifications from Malaysia’s Ministry of Investment, Trade and Industry, though no details were disclosed. A similar meeting between China and Cambodia saw the Chinese trade envoy request that Phnom Penh address Beijing’s concerns, with Cambodian officials also providing unspecified clarifications. The complaints relate to US–Malaysia and US–Cambodia agreements that include commitments to align with Washington on national security matters such as export controls, sanctions, investment screening, and restrictions on sensitive technologies. Malaysia’s agreement includes preferential access for US goods and services, exemptions from the US 19% reciprocal tariff, and obligations to follow US trade restrictions, adopt US-aligned export controls and sanctions, prevent circumvention, and explore investment-review mechanisms covering critical minerals and infrastructure. Cambodia’s pact commits to removing tariffs on US food, agricultural, and industrial goods in exchange for exemptions from the 19% tariff, while requiring compliance with the US export control regime, adherence to the entity list, cooperation on third-country investment information and strengthened defence trade and transshipment controls. The agreements were signed during President Donald Trump’s visit to Malaysia and form part of a series of October pacts with regional economies including Vietnam and Thailand.

THE PHILIPPINES
Economic growth could recover to 5.5% by first quarter of 2026
(27 November 2025) The Philippines’ Finance Secretary said economic growth could recover to 5.5% by the first quarter of next year as government spending returns to pre-scandal levels following a halt linked to corruption in flood control projects. He described the pause as necessary to address leakages in infrastructure spending, with the former finance chief previously estimating that 25%–70% of flood control budgets were lost, costing up to USD 2 billion annually from 2023 to 2025. The new finance secretary said reforms, prosecutions, and efforts to recoup stolen funds would support a rebound, alongside improved external conditions such as the US-China trade truce and recent investment commitments, including Samsung Electro-Mechanics’ USD 860 million expansion. Third-quarter GDP growth fell to 4%, the weakest since the pandemic, with the central bank expecting corruption-related effects to persist into next year and forecasting a return to the 6%–7% target only in 2027. The finance secretary plans to convene multiple departments next week to prioritise easily deployable or near-completion projects to offset underspending. He noted that government expenditure accounts for nearly 17% of GDP but ruled out a major stimulus, emphasising fiscal discipline and targets to narrow the budget deficit to 5.5% of GDP in 2024 and 5.3% in 2026.

INDONESIA, UNITED STATES
Indonesia rejects US demands for “poison pill” clauses in reciprocal tariff trade deal
(28 November 2025) Indonesia has rejected US demands to include “poison pill” or “loyalty” clauses in the reciprocal tariff trade deal currently under negotiation, with officials stating the terms excessively constrain economic sovereignty and are too one-sided. The clauses, which Washington imposed on Malaysia and Cambodia in agreements signed last month, would allow the US to terminate a deal if a partner signs a pact deemed harmful to US interests, and would require alignment with US sanctions, restrictions, and digital tax rules. Indonesia’s pushback emerged as the two sides work to finalise a July preliminary deal that imposed a 19% reciprocal tariff on Jakarta, with Indonesian officials emphasising concerns about losing autonomy over relations with other countries. Analysts said Indonesia’s larger economic scale, including USD 28 billion in goods exports to the US in 2024 versus Malaysia’s USD 53 billion, has strengthened its negotiating leverage, though the ultimate balance of power remains uncertain. The resistance underscores challenges for the US in persuading Southeast Asian partners to limit China’s role in regional trade and supply chains, with Beijing remaining a dominant trading partner and top investor in sectors such as nickel in Indonesia. The Malaysian deal has stirred controversy domestically, with critics warning it compromises sovereignty. Indonesia’s economic ministry has said negotiations are ongoing and may conclude this year, while a US Trade Representative official said Washington aims to expand bilateral trade while recognising each country’s sovereign rights over economic security.

SINGAPORE
China, United States, and Malaysia are top overseas postings for Singapore workers
(28 November 2025) China, the United States and Malaysia accounted for 18.3%, 13.6% and 10.1% of overseas postings for Singapore resident employees respectively, but only 3.1% of the resident labour force – about 76,000 people – had worked abroad full-time for at least six months, according to new data released by the Ministry of Manpower (MOM). Overseas experience was most common among workers in their 40s (4.6%) and 50s (4.5%), with over half taking their first posting between ages 25 and 34, while the incidence among those aged 25 to 29 was 0.5%. Senior roles showed higher exposure, with 7.7% of managerial employees having worked abroad, and overseas experience increased with income, rising to 16.8% among those earning SGD 30,000 or more per month compared with 10.6% for those earning SGD 15,000–SGD 19,999 and about 3% for those earning SGD 5,000–SGD 9,999. Outward-oriented sectors recorded higher overseas exposure at 3.8% versus 2.2% in domestic-focused industries, with professional services (4.7%), information and communications technology (4.6%), finance and insurance (4.2%) and wholesale trade (3.8%) showing the highest levels. Workers with overseas stints were predominantly professionals (45.2%) and managers (30.7%), with manufacturing, finance and ICT the most common sectors for postings.

CAMBODIA
IMF projects Cambodia’s growth to slow to 4.8% in 2025 and 4.0% in 2026
(27 November 2025) The IMF’s 2025 Article IV Consultation projects Cambodia’s growth to slow to 4.8% in 2025 and 4.0% in 2026, down from 6.0% in 2024 and an estimated 6.2%in the first half of 2025, as trade disruptions, border tensions and weak credit growth dampen investment and household spending. The IMF attributes the downgrade to declining remittances, softening tourism, tariff effects and margin pressures on manufacturers, alongside “anemic” domestic credit growth. Inflation is expected to rise modestly in 2025 before easing in 2026, with risks tilted to the downside due to vulnerabilities in garments and footwear exports, border-related impacts on tourism, and elevated private debt and rising non-performing loans. The Fund highlights additional concerns over high real estate indebtedness and governance risks but notes potential upside from deeper regional integration and the reintegration of returning migrant workers. Executive Directors describe the recovery as uneven and increasingly fragile, urging temporary fiscal support for vulnerable groups, gradual fiscal consolidation, agile monetary policy and the phased restoration of reserve requirements. They identify urgent financial-sector reforms, including ending forbearance by end-2025, strengthening supervision, improving stress testing, enhancing asset-quality reporting, developing crisis-management and insolvency frameworks, and establishing deposit insurance while addressing AML/CFT gaps. Structural reforms to diversify exports, raise productivity, improve competitiveness and strengthen governance are deemed essential.

VIET NAM
Viet Nam awards multiple 5G equipment contracts to Huawei and ZTE in 2025
(28 November 2025) Viet Nam has awarded multiple 5G equipment contracts to Huawei and ZTE in 2025, including a USD 23 million Huawei-linked consortium deal in April and at least two ZTE antenna contracts worth over USD 20 million, with one secured last week and the first publicly disclosed in September. These awards followed the White House’s imposition of tariffs on Vietnamese goods, though no link has been established. Procurement data indicates that while Ericsson, Nokia and Qualcomm continue to supply Viet Nam’s 5G core infrastructure, Chinese firms have recently secured smaller tenders with state-owned operators. The contracts have triggered concern among Western officials, who view the historical exclusion of Chinese firms from Viet Nam’s digital infrastructure as a precondition for support in advanced technologies. Western governments citing national security risks have banned Huawei and ZTE from their telecom networks, and the new Vietnamese contracts were discussed in two recent meetings among senior Western officials in Hanoi, including warnings from a US official about risks to network trust and access to US technology. Discussions have also covered whether sections of the Vietnamese network using Chinese technology could be isolated, though experts note that equipment suppliers could still gain access to network data. Additional developments include a June agreement on 5G technology transfers between Huawei and Viettel, according to Viet Nam’s defence ministry, with one Viettel source citing lower Chinese costs. The recent wins come as Viet Nam–China ties deepen, supported by progress on rail links and special economic zones near the border.

RCEP Monitor

SOUTH KOREA
Central bank keeps its policy rate at 2.5% over concerns of rising home prices and foreign exchange vulnerability
(27 November 2025) South Korea’s central bank kept its policy rate at 2.5%, matching forecasts from six economists citing the need to contain housing-market borrowing and manage financial stability risks. The decision follows the Bank of Korea’s last cut in May, when the rate was lowered by 25 basis points, and the board’s previous hold, which highlighted concerns over rising household debt and exchange rate volatility. The government has introduced loan-to-value limits under President Lee Jae Myung to reduce household exposure to real estate and support consumption. South Korea’s Finance Minister described the economy as being at a “turning point” and called for stronger backing of artificial intelligence, autonomous vehicles and other emerging industries. The meeting was the first rate decision since Seoul and Washington agreed a USD 350 billion investment arrangement, including a USD 20 billion annual cap on South Korea’s US investment to limit won depreciation risk. The easing of trade tensions with the US, a key market for semiconductor and auto exports, has strengthened expectations of improved growth. The economy expanded 1.2% quarter-on-quarter in Q3 after 0.7% growth in Q2, following a 0.2% contraction in Q1. BNP Paribas expects the BOK to revise its GDP forecast to 1% for 2025 from 0.9%, and to 1.6% from 0.9% for 2026, citing stronger semiconductor demand and expansionary fiscal policy.

SOUTH KOREA
South Korean equities retreat from early gains on steady rates
(27 November 2025) South Korean equities retreated from early gains after the Bank of Korea kept its policy rate at 2.50%, with the market closing 0.7% higher after rising up to 1.6%, while the won strengthened 0.2% despite an 8% decline in the second half of the year. Pantheon Macroeconomics said stronger growth expectations, reduced trade risks, and higher inflation linked to exchange rate passthrough likely push a potential rate cut from January to February, adding that the governor’s comment that rates are “near neutral level considering financial stability” signals limited remaining room for easing. Risk appetite across emerging Asia improved as US rate futures priced in an over 80% probability of a Federal Reserve cut next month. MUFG said easing external pressures, including lower oil prices and prospects of further US cuts, may support global sentiment ahead of year-end. Asian currencies were mostly steady, with slight appreciation in the rupiah and Malaysian ringgit.

AUSTRALIA
Core inflation rises to 3.3% in October, exceeding central bank’s target band
(26 November 2025) Australia’s core inflation rose to 3.3% in October, exceeding forecasts of 3% and surpassing the Reserve Bank of Australia’s 2–3% target band, while headline CPI reached 3.8%, driven by housing, food, and recreation and culture. Non-tradables prices rose 4.8%, tradables 2%, services 3.9%, discretionary goods and services 3.2%, and non-discretionary items 4.3%, reflecting persistent domestic price pressures. The data prompted gains in the Australian dollar (+0.6%) and a 14-basis-point increase in three-year government bond yields, and shifted market expectations toward a potential RBA rate hike in 2026 rather than a cut. Economists at UBS and Barrenjoey anticipate the first increase may occur in May 2026, potentially followed by further rises to 4.1% by August, though the bar for action remains high. The report was the first release of Australia’s new monthly inflation measure, though the RBA continues to focus on the quarterly trimmed-mean CPI, which excludes volatile items and better reflects domestic demand. Labor market tightness persists, with unemployment falling to 4.3% in October and annual wage growth remaining elevated, supporting inflationary pressures. The Assistant Governor noted the labor market is slightly beyond sustainable levels for inflation at target. The RBA is expected to leave rates unchanged at 3.6% at its 8–9 December meeting. Analysts emphasise that ongoing inflation pressures and the unwinding of government energy subsidies may require tighter policy before any cuts are considered, contrasting with US Fed easing and New Zealand’s recent 25-basis-point reduction.

ASEAN
Total IPO proceeds in Southeast Asia in 2025 reach USD 5.6 billion
(19 November 2025) Southeast Asian IPO proceeds reached USD 5.6 billion as of 14 November, up 53% from full-year 2024 despite the number of deals falling to 102 from last year’s 136, according to Deloitte’s Southeast Asia IPO 2025 report. Deloitte attributed the rebound to larger issuers and an average deal size rising to USD 65 million from USD 27 million. Singapore led by total proceeds of USD 1.6 billion from nine listings, including NTT DC REIT (USD 824 million) and Centurion Accommodation REIT (USD 597 million), while Viet Nam raised a combined USD 1 billion from Techcom Securities (USD 525 million) and VPBank Securities (USD 484 million). Malaysia recorded 48 IPOs raising USD 1.1 billion; Indonesia saw 24 deals totalling USD 921 million, led by Merdeka Gold Resources (USD 279 million) and Chandra Daya Investasi (USD 144 million); major regional listings also included Thailand’s Mr. D.I.Y. unit (USD 174 million) and the Philippines’ Maynilad Water Services (USD 583 million). The report noted that 27 Southeast Asian companies listed in the U.S. raised USD 329 million, and three listed in Hong Kong raising USD 588 million. Deloitte expects sustained momentum into 2026, supported by regulatory reforms, improved sentiment and cross-border pipelines, though tariff policies, trade tensions and issuer caution may influence timing and offer sizes.

RCEP Monitor

CHINA
Urban youth unemployment rate declines to 17.3% in October
(18 November 2025) China’s urban youth unemployment rate for those aged 16–24 excluding students declined to 17.3% in October from 17.7% in September, according to the National Bureau of Statistics, though labour market pressures persist following the entry of 12.2 million graduates over the summer and the August spike to a post-2023-revision high. Graduates are increasingly pursuing alternatives to corporate employment, including further study and the national civil service exam, with 3.72 million applicants registered for the upcoming test compared with 38,100 available positions, creating a ratio of roughly one successful candidate for every 98 applicants; Beijing has also raised the exam’s age limit. Individual jobseekers report limited interview opportunities despite broad applications across sectors, citing economic unpredictability and a preference for stable civil service roles. The unemployment rate for those aged 25–29 excluding students remained at 7.2% in October, while China’s overall urban jobless rate declined to 5.1% from 5.2% in September.

CHINA
China accelerates consolidation of small and midsize financial institutions
(18 November 2025) China is accelerating consolidation of small and midsize financial institutions exposed to weak public-investment lending, with Inner Mongolia merging 120 lenders into Inner Mongolia Rural Commercial Bank in May and Henan combining 25 lenders into a new bank in February; the National Financial Regulatory Administration reported a net reduction of 225 institutions in the first half of 2025, exceeding the 195 decline recorded in all of 2024. Most closures involved rural institutions, which account for about 80% of China’s financial entities, and further mergers are under way, including 13 institutions in Jilin and planned consolidation in Xinjiang, driven by economic slowdown, population outflows and mounting local government financial stress. Local authorities face sharply reduced land-sale revenue, down around 60% from its 2021 peak, and rising off-budget debt linked to unprofitable local government financing vehicles, with IMF estimates placing outstanding LGFV debt at roughly CYN 60 trillion in 2023; Beijing has committed CYN 10 trillion over five years to contain hidden debt, though analysts argue the scale remains insufficient. The Central Committee’s recommendations for the 2026–2030 plan call for coordinated risk management across real estate, local government debt and small and medium financial institutions. Regional banks hold nearly CYN 1.4 trillion in nonperforming loans despite CYN 530 billion in public support over five years, raising concerns that bad-loan levels could increase without economic improvement. While mergers are expected to create economies of scale, analysts emphasise the need for stronger governance, noting past issues including misconduct, supervisory failures and the near-collapse of Baoshang Bank in 2019.

JAPAN
Economy contracts annualised 1.8% in July-September quarter, first decline in six quarters
(17 November 2025) Japan’s economy contracted an annualised 1.8% in the July–September quarter, or 0.4% quarter-on-quarter, marking the first decline in six quarters and narrower than the median market estimate of 2.5% annualised and 0.6% quarterly, with government data attributing the downturn mainly to weaker exports following the implementation of a baseline 15% US tariff on most Japanese imports. Net external demand subtracted 0.2 percentage points from growth after contributing 0.2 points in the previous quarter, as automaker shipment volumes fell sharply following earlier front-loading before tariff increases. Housing investment declined due to tighter energy-efficiency regulations introduced in April. Private consumption rose 0.1%, in line with expectations but slower than the 0.4% increase in the second quarter, while capital spending grew 1.0%, exceeding the 0.3% estimate. Economists characterised the contraction as driven by one-off factors such as housing investment and maintained a view of gradual recovery over the next one to two years. A Japan Centre for Economic Research poll of 37 economists forecasts a 0.6% expansion in the fourth quarter. The data coincides with Prime Minister Sanae Takaichi’s government preparing a stimulus package in response to high living costs, with advisers likely to cite weak GDP results in calling for caution in Bank of Japan rate-hike plans.