Countries have also bypassed US to trade with one another in view of tariff risks
[SINGAPORE] DBS analysts are upbeat about the region’s prospects for 2026, forecasting that Asian currencies will regain “much-needed stability”, and that economic growth will be “only marginally lower”.
The positive outlook is due to the nature of US trade restrictions, which have not been as “blanket and burdensome” as initially anticipated, said DBS Group Research in its economic outlook and market strategy report for 2026 published on Tuesday (Nov 18).
Countries have also bypassed the US to trade with one another in view of the tariff risks, its analysts noted.
“As separate (trade) paths are charted, investment flows get recalibrated. The likes of Malaysia, Singapore and Vietnam are already seeing record foreign direct investment. We see more potential in 2026 and beyond,” said the analysts.
Global trade development
The report said that while 2025 began with an “unprecedented fear about global trade”, it is ending with “guarded relief”.
“It has turned out to be a test of resilience that the global economy in general and trade-intensive Asia have passed well so far,” said DBS.
The report noted that the tariffs, widely varied in aspects such as rates and exemptions, have not drastically affected the demand of US consumers.
Most Asian countries have also exported more to the US in 2025. In tandem, China increased overall exports to the rest of the world by 9 per cent.
While American dominance in global trade, commerce and tech systems remains undisputed, the US’ shift away from multilateralism has caused states to increasingly engage other countries.
Across areas such as cybersecurity, climate tech and cross-border payment, new deals back the multilateral standards the US once supported, the report said.
Ringgit and baht to benefit from interest rate cuts
On the currency front, DBS flagged the “rate-sensitive” Malaysian ringgit and Thai baht, in particular, as Asian currencies that stand to benefit from interest rate cuts in the US next year.
For regional equity markets, the analysts said that country-specific drivers and accommodative monetary policies in Asean will offset external uncertainties.
For example, equity market initiatives in Singapore and attractive valuation and growth prospects for the Philippines will help to mitigate external uncertainties, said the report.
Outlook for Singapore
DBS anticipates Singapore’s gross domestic product growth to ease to 1.8 per cent in 2026 from 4 per cent in 2025 due to a “trade drag” from the US tariffs’ lagged impact.
However, it expects this to be offset by tech investments and adoptions, and supportive financial conditions.
Core and headline inflation in 2026 are predicated to average 1 and 1.2 per cent, respectively, and remain below 2 per cent.
Despite the Singapore dollar appreciating, a slower fall in global oil prices in 2026 will probably weaken the disinflationary impact from external factors. Price adjustments for green transition may increase electricity tariffs and travel-related costs.
While this will possibly increase public transport fares by 5 per cent, DBS expects enhanced public healthcare and education subsidies to cap essential services inflation.
“Regarding policy, we expect the MAS (Monetary Authority of Singapore) to keep the powder dry in 2026,” the report added.
The Singapore equity market had a strong positive valuation rerating in 2025, and DBS expects gains to be relatively gentler in 2026, helped by MAS measures such as the Equity Market Development Programme and Value Unlocking Programme.
Trade-related industries will also face challenges from escalating trade tensions from US tariffs, and likely payback from earlier front-loading of exports.
Furthermore, the report noted that the electronics upcycle, beginning in mid-2024, is nearing its peak and could moderate, if artificial intelligence (AI)-driven demand eases or US semiconductor tariffs are enforced.
Industries for modern services such as finance and insurance may also face external pressures, although the effect could be softened through strong AI digitalisation efforts, supportive financial conditions and Singapore’s appeal as a trusted business hub.
The construction sector is projected by DBS to outperform, buoyed by major transport investments, hospitality expansions and housing development.
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