Most APAC economies to see slight pickup in GDP growth
Uptick expected in consumer discretionary spend, focusing on travel, big-ticket purchases and experiences
SINGAPORE, Dec. 10, 2024 /PRNewswire/ — The Mastercard Economics Institute (MEI) has released its annual economic outlook for 2025, forecasting continued growth for Asia Pacific aligned with 2024 levels, while lower inflation and easing interest rates are set to provide relief to consumers and households. This is largely in line with broader economic trends, as the global economy is expected to see 3.2 percent growth following a pace of 3.1 percent in 2024.
As the disinflationary environment eases the burden on consumers, MEI forecasts that APAC will see tight labor markets and a catch-up of inflation-adjusted wages, which is expected to contribute to increased spending—especially on discretionary items, including big-ticket purchases such as electronics, furniture and appliances. While some of the pent-up demand for experience spending has subsided, consumers are still prioritizing big-ticket moments, such as major concerts and events.
Travel in APAC is expected to remain robust, though total passenger numbers in mid-2024 were still 12 percent short of 2019 levels. Some of this shortfall is the result of outbound travel from Northeast Asia—particularly the Chinese Mainland and Japan—having yet to recover to pre-pandemic levels.
“If 2024 was about ‘getting back to normal’, 2025 is about normalization as volatility subsides and easing monetary policy allows consumers to benefit from economic growth,” said David Mann, chief economist, Asia Pacific, Mastercard. “However, policy decisions like potential interest rate rises in Japan or U.S. tariffs could significantly impact this growth. Businesses should leverage consumer optimism while preparing for potential trade disruptions.”
APAC Outlook
India is expected to be the fastest-growing major economy in calendar year 2025, with a GDP growth of 6.6 percent and consumer spending growth of 6.2 percent, driven by a rising middle class and investment, as it is less exposed to global demand.Chinese Mainland is expected to stabilize with 4.5 percent growth in 2025, driven by increased government stimulus and pro-growth measures to counteract economic headwinds like weakened consumer confidence and a slowdown in the housing market.Malaysia’s economy is expected to outperform in 2025 with 4.7 percent GDP growth, driven by a robust labor market and strengthening investment.Japan faces a unique economic environment with continued inflation volatility and the Yen at historic lows, contributing to the ongoing tourism boom and spending on high-end luxury goods.Australia, New Zealand and Singapore, having experienced stronger inflation shocks than the rest of the region, are likely to see relief as levels fall to approximately 2-3 percent and central banks ease their respective monetary policies.
Trends to Watch
1. Pricing Priorities: Travel “Twins” and Mass Apparel
MEI has observed that travelers are opting for destinations that offer similar experiences to popular hotspots but with lower prices and smaller crowds. These “travel twins” are growing faster and seeing higher year-on-year increases in hotel bookings. For example, Lombok in Indonesia, with its stunning beaches and serene landscapes, is an ideal alternative to Bali, while Fukuoka in Japan offers a Tokyo-like experience without the high costs and crowds.
Similarly, consumers are seeking more cost-effective apparel options. MEI found that, in terms of YTD spending growth, mass apparel brands are outpacing luxury ones globally by an average of 7 percentage points. However, Japan is an outlier, with the depreciating Yen boosting visitor spending on luxury goods, resulting in high-end brand growth outpacing mass market growth by 14 percentage points.
“Even though consumers are set to spend in 2025, there are some caveats,” said Mann. “For essential purchases without substitutes, increased prices are unlikely to affect sales. However, where alternatives exist, consumers may opt for more affordable versions of goods and experiences. This budget-conscious behavior may reflect residual caution after years of economic uncertainty and an attempt to balance a higher, yet relatively stable, cost of living.”
2. Migration and Money
The report highlights the crucial role of remittances for APAC economies, with four of the top five recipient countries being in the region: India, China, the Philippines, and Pakistan. Despite some loss of human capital in these economies due to outbound migration, remittances provide a lifeline for low- and middle-income communities. This is especially significant in South Asia, where remittances contribute over 6 percent of Sri Lanka’s GDP and 5 percent of Bangladesh’s GDP.
3. The “SHEconomy”
Based on OECD data, MEI finds that the cyclical labor force participation rate has more than fully recovered to 2019 levels for women in 38 of the 46 economies surveyed, while only 23 economies show higher participation for men. India stands out with the participation rate for women aged 25-54 up 12 percentage points from 2019 to 2023, compared to a 1 percentage point gain for men of the same age.
Policy: Shifting Gears?
Heading into 2025, Japan and the Chinese Mainland are taking proactive measures to shore up their economies. The Bank of Japan continues to raise interest rates to combat ongoing inflation, an outlier in a region where inflation has mostly eased. Meanwhile, the Chinese government has announced pro-growth actions, including cuts to give banks more latitude, a swap facility for non-bank financial institutions to borrow from the People’s Bank of China to purchase stocks, and reducing the down-payment requirement for second home purchases to a historic low of 15 percent.
“The policies of individual governments could have substantial knock-on effects in 2025,” adds Mann. “For instance, part of the shortfall in APAC tourism is due to decreased outbound travel from Northeast Asia. Further recovery may depend on how successfully the Chinese Mainland and Japan stabilize their economies. While there is uncertainty around increased tariffs, MEI suggests that some impacts can be offset by greater intra-regional trade and growing trade in data and services.”
MEI’s Economic Outlook 2025 examined 13 markets[1] across Asia and Oceania, using multiple public and proprietary data sets, including aggregated and anonymized Mastercard sales activity, and models estimating economic activity. Additional reports and insights from MEI can be found here.
About Mastercard Economics Institute
The Mastercard Economics Institute (MEI) provides insights into global and local economic trends using advanced analytics and Mastercard’s proprietary data assets. Established in 2020, MEI supports businesses, governments, and policymakers with economic monitoring services and timely analysis on economic themes including consumer spending, retail and travel trends, and other local and global barometers of economic performance. MEI offers valuable perspectives to inform decision-making and promote sustainable growth worldwide through our thought leadership series, and through Mastercard’s specialized product offerings.
[1] Australia, Chinese Mainland, Hong Kong SAR, India, Indonesia, Japan, Malaysia, New Zealand, Philippines, Singapore, South Korea, Taiwan, Thailand
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SOURCE Mastercard
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