REGIONAL REPORT
South and east Asia
However, there is also more to the story than shifting trade and tariff policies.
“ Drawing on lessons from the 2018 tariffs, production and sourcing are shifting within the region, with a larger share of intermediate goods flowing to— and through— Southeast Asia and other hubs. Parallel to this regional trade boost is a powerful AI-driven cycle that has bolstered exports of advanced technology from economies including Korea and Japan, deepening intra-Asian trade. These dynamics are reinforced by monetary easing across many economies and targeted fiscal support in some, notably China, Korea, Indonesia and Vietnam,” added the IMF.
However, ageing is diminishing the demographic dividend in some major economies. Productivity growth is also slowing because investment isn’ t always reaching the most dynamic firms. Asia has grown more slowly this decade than in the last, confirmed the IMF, citing ageing populations, weaker productivity, economic scars from the pandemic and rising youth unemployment, alongside dissatisfaction at“ the lack of jobs and opportunities.”
“ In conclusion, resilience endures but mounting headwinds are straining a growth engine already challenged by the trade-policy reset. Countries should rebalance towards domestic demand, fortify medium-term fiscal frameworks and deepen regional trade and financial integration to keep growth durable and inclusive,” concluded the IMF.
Growth in South Asia is projected to be robust at 6.6 per cent this year, said the World Bank in October 2025, but a significant slowdown looms on the horizon. Reforms to promote trade openness and technology adoption could help the region to create jobs and catalyse growth, explained the World Bank in its twice-a-year regional outlook.
“ South Asia has enormous economic potential and is still the fastest growing region in the world. But countries need to proactively address risks to growth,” said Johannes Zutt, World Bank Vice President for South Asia.“ Countries can boost productivity, spur private investment and create jobs for the region’ s rapidly expanding workforce
An eye on AI
Artificial Intelligence( AI) is acting as a crucial tool for efficiency, resilience and competitiveness in Asia’ s complex supply chains. The region is leveraging AI to optimise logistics, enhance manufacturing capabilities and accelerate the growth of digitally delivered services. The global AI buildout, while centred on the U. S., has also benefited markets in Taiwan, South Korea and China.
“ Traditionally anchored in commodities and export-oriented manufacturing, Southeast Asian countries are starting to align more closely with the global AI investment cycle, primarily by deepening their involvement across higher valueadd areas like infrastructure, hardware and complementary supply chains,” commented JP Morgan in analysis this January.
In 2025, Asia Pacific accounted for the largest share of the CNC machine market
Image: Shutterstock. com. by maximizing the benefits of AI and lowering trade barriers, especially for intermediate goods.”
“ East Asia and the Pacific region continue to outperform most of the rest of the world, but creating more jobs and sustaining growth will require ambitious reforms as the region navigates global uncertainties. Our October 2025‘ East Asia and Pacific Economic Update’ projects regional growth of 4.8 per cent in 2025 down slightly from 5.0 per cent in 2024. Vietnam leads at 6.6 per cent growth, followed by Mongolia and the Philippines. China, Cambodia and Indonesia are each projected to grow at 4.8 per cent, while Pacific Island countries are projected at 2.7 per cent, and Thailand at 2.0 per cent,” added the World Bank.
Growth in 2026 is projected to slow down to 4.3 per cent. Growth outcomes will be shaped by higher trade restrictions, easing— but still elevated— global uncertainty and slowing global growth, as well as domestic policy choices, especially the reliance in some countries on fiscal stimulus rather than structural reform.
Busan high-speed trains in South Korea.
Image: Shutterstock. com.
CNC machine markets
“ In 2025, Asia Pacific accounted for the largest share of the CNC machine market [ Ed: metal cutting and metal forming ], driven by the region’ s booming manufacturing industry, with a market share of 55.70 %,” commented analyst, Fortune Business Insights.
“ The increasing demand for automation and advanced machining technologies, particularly in countries such as China, Japan and India, has boosted machine adoption. Rapid industrialisation, coupled with government initiatives supporting smart manufacturing, is propelling industry growth in this region. Additionally, the rise in automotive, electronics and aerospace sectors is contributing significantly to the Asia-Pacific market,” it added.
China dominates the Asia Pacific CNC machine market due to its strong manufacturing base and extensive industrial growth. The country’ s focus on upgrading its manufacturing industries with advanced automation technologies has led to a substantial increase in the demand for CNC machines. Government initiatives promoting the“ Made in
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