Asia, the main engine of global economic growth, will continue its current momentum in 2026

The artificial intelligence (AI)-driven investment boom coupled with more supportive monetary and fiscal policies will drive strong global economic growth in 2026, Nomura recently released 2026The annual Global Economic Outlook report pointed out.

Rob Subbaraman, head of global macro research and co-head of global market research at Nomura, said the report was named "Towards Growth" because they are optimistic about the outlook for the global economy next year. The global economy showed resilience in 2025 in the face of tariffs, policy uncertainty, and political divisions, with better-than-expected growth, and this momentum will continue in 2026. The report expects that while trade-related disruptions are likely to persist and the global economy will show signs of stabilization and accelerated growth in 2026, growth across regions will show an uneven pattern.

The report expects the U.S. economy to maintain its growth leadership among developed markets, achieving a GDP (gross domestic product) growth rate of 2.4%. The eurozone economy is likely to accelerate in the second half of 2026, with an expected growth rate of 1.3%, especially Germany's 1 trillion euro fiscal expansion plan will provide substantial support from the second half of the year.

Asia will continue to maintain strong economic momentum. Nomura expects China's GDP growth to fall to 4.1% year-on-year in the first half of 2026, and then rebound in the second half of the year, supported by policy stimulus and a lower base effect4.5%。 Japan's economy continues to recover, with GDP growth in South Korea, Singapore, Malaysia and India exceeding consensus expectations.

01.K-shaped trends in the global economy

Su Bowen told Caijing that although US President Trump will be in 2025 4A series of major tariff decisions were announced in January, but ultimately the global economy showed resilience. He analyzed that one of the reasons is that the tariffs finally implemented by the United States are lower than the figures announced by Trump, and many products are excluded from the tariffs. Second, trade transfers to avoid high tariffs have alleviated tariff pressure to some extent. Third, companies are sensitive to tariffs, such as U.S. companies importing a lot before the tariff increase; Absorb tariff costs by reducing profit margins rather than passing them on.

But the impact of tariffs may be more pronounced in 2026. Su Bowen said that if tariffs remain at current levels over time, perhaps companies will pass on more tariff costs to consumers. "This is one of the reasons why we believe US inflation will remain around 3% in the coming quarters. ”

Regarding the direction of the global economy, Su Bowen pointed out that due to the further intensification of the imbalance between economic income and wealth, the global economy presents the characteristics of a "K-shaped economy", and artificial intelligence will accelerate this process. "AI-related stock market performance has a positive wealth effect on wealthy households investing in the stock market, while poor households are left behind. AI can also lead to employment chaos, especially among young people, who will find it difficult to find work. ”

Facing the "K-shaped economy"In income inequality, Su Bowen said it will become more difficult for governments to control their budgets, and they will need to do more fiscal expansion, otherwise they may be replaced by more populist governments. At the same time, the general increase in public spending on defense, addressing aging societies and disaster relief caused by climate change has made it more difficult for countries to control budget deficits.

Nomura's outlook report pointed out that fiscal constraints will be an important theme in 2026, and if the government fails to control the budget deficit, it may lead to concerns about inflation and financial restraint.

02.Risks to the U.S. economy

According to data recently released by the U.S. Department of Commerce, U.S. GDP grew by 4.3% on an annualized basis in the third quarter of 2025, the fastest quarterly growth rate in two years. The U.S. economy contracted by 0.6% in the first quarter of this year, but has since reversed the situation, growing by 3.8% month-on-month in the second quarter.

Nomura expects the U.S. economy to grow above trend for the fourth consecutive year in 2026. David WSaif pointed out that one of the reasons is that the overall inflation rate will fall, even if tariffs continue. In addition, the Great and American Act passed in July 2025 will have a positive stimulus effect on the US economy.

"Most importantly, we expect investment in AI infrastructure to remain strong, which will allow the US economy to grow by 1%-1.5% per year. Saif said.

The current AI investment boom in the United States is in the ascendant. U.S. tech giants have invested heavily in computing power and infrastructure, with record capital expenditures. The financial reports of the five major U.S. technology companies, Microsoft, Amazon, Google, Meta, and Oracle, show that their total capital expenditure in 2025 will exceed $370 billion, which is expectedCapital expenditure will be higher than $470 billion in 2026.

Saif said that the current pull of artificial intelligence on the U.S. economy mainly comes from investment in infrastructure such as data centers, and artificial intelligence is still in the early harvest stage in improving productivity; There is a risk that the AI boom will fade in the U.S. economy as the return on investment in artificial intelligence is unlikely to be seen anytime soon, but for now, it seems that investors still have enough enthusiasm and willingness to allocate capital to this area, and strong investment in artificial intelligence will continue in 2026.

For inflation in the United States, Saif expects inflation in the United States to remain relatively sticky in 2026 if tariffs remain unchanged, and will be closer to 3% rather than 2% most of the time , untilIt will only begin to decline sharply in the fourth quarter of 2026.

Su Bowen reminded that the United States still faces inflation risks because the U.S. economy continues to grow and will enter the new year with looser fiscal and monetary policies, coupled with the AI boom. He noted that in addition to inflation in consumer prices, there is also inflation in assets and commodities. This is because the AI boom could lead to further strong asset price increases; If the Fed loses its independence, investors may turn to alternatives to the dollar, and commodities are sought after as a result.

A test of the Fed's independence will be one of the risks facing the US economy in 2026. Saif pointed out that Trump's identification with unified executive power means that he wants to exercise greater power, even over institutions that were previously considered independent or quasi-independent, which would push Trump to appoint a Fed chairman who aligns with his position, giving him more say in Fed policy.

According to reports, Trump may appoint a new Fed chairman in January next year. He has said that the new Fed chairman will support a significant reduction in interest rates to stimulate the economy and reduce the cost of financing U.S. Treasuries. Current hot candidates include former Federal Reserve Governor Kevin AndersonWalsh, White House National Economic Council Director Kevin BushHassett, Federal Reserve Governor Christopher AWaller.

The term of current Fed Chair Powell will end in May 2026. Although Powell was nominated by Trump in his first presidential term, Powell is often criticized by Trump for not cutting interest rates as aggressively as Trump hoped.

Powell will also chair three of the Fed's eight interest rate meetings next year. "We believe that the Fed under Powell has completed rate cuts, so we do not expect to cut rates again at the first three meetings next year. Saif said. But since President Trump may appoint a dovish Fed chairman, Nomura expects the Fed to cut interest rates twice more in June and September next year, for a total of 50 basis points.

2025 will be a stormy year for the dollar. In the first half of the year, the US dollar index fell as much as 10.8%, the largest decline in the same period since the collapse of the Bretton Woods system in 1973. Although it has rebounded slightly since then, it is difficult to change the overall decline.

Saif told Caijing that the dollar is expected to depreciate slightly next year, but it is insignificant compared to the situation in 2025. "If the Fed ends up being more dovish than we expected, there are risks in both directions. On the one hand, the dollar may show a lot of weakness, but if the US economy grows faster than we expected, this will lead to a stronger dollar. He said.

Saif pointed out that most central bank interest rate cuts have ended this year, and the United States and the United Kingdom will continue to cut interest rates next year in developed markets. If the Fed cuts interest rates more than twice next year, it will have a substantial impact on the dollar. "So far, the Fed's rate cuts have been largely in line with other developed central banks, but next year will be at an inconsistent pace, creating real interest rate differentials between the US and other countries, which will have a greater impact on the dollar. Saif said.

03.Artificial intelligence is differentiating the Asian economy

Asia, the main engine of global economic growth, will continue its current momentum in 2026. Nomura expects Asia to achieve economic growth of 3.6% in 2026.

Nomura Asia (excluding Japan) and India's chief economist Sonal ·Varma said that positive drivers of the Asian economy include US-led AI investment demand will have a positive spillover effect on Asia, and technology exporting countries such as South Korea, Malaysia and Singapore have performed strongly. She also said that the biggest downside risk to the Asian economy is the bursting of the AI bubble, because much of Asia's growth today is directly or indirectly affected by stronger demand for artificial intelligence.

Regarding the impact of U.S. tariffs, Varma said that although the United States has imposed tariffs on Asian trading partners to varying degrees, the impact on Asian exports is mainly focused on non-technical products. Demand from artificial intelligence, coupled with semiconductors and electronics being excluded from tariffs, supported Asia's overall export performance. Exports from non-high-tech sectors slowed down due to tariffs, especially in industries hit by higher tariffs, such as steel and aluminum.

"The question for most countries is how to ensure the resilience of exports in a world where tariffs are the new normal. Varma said. Over the past year, countries have tried to negotiate new bilateral trade agreements, find new export markets, and diversify their exports.

"Tariffs will ultimately change the direction of trade and investment flows. Varma said. She said the shift in supply chains will continue to create opportunities in Southeast Asia and India. Among Southeast Asian countries, Malaysia will be the main beneficiary of supply chain shifts. The AI boom is a huge boon for South Korea, as well as for some other countries involved in AI processing, chip processing, and supply chains, where Malaysia's economic growth has benefited from data center construction

Su Bowen pointed out that the traditional model is that Asian countries export to the United States and Europe, and the proceeds from exports are purchased to buy U.S. Treasury bonds and recirculate them to the United States, but there are huge opportunities within Asia, especially to take advantage of the comparative advantage between Northeast Asia. He analyzed that North Asia, where China, Japan and South Korea are located, has excess savings, faces an aging population, and has invested heavily in infrastructure; The opposite is true in Southeast Asia and India, with insufficient investment, a lot of room for infrastructure construction, a young population, and often not enough savings. "I think there should be more investment flowing from North Asia to Southeast Asia and India, as well as more trade integration, and Asia can benefit a lot from this. ”

04.The Indian economy under high tariffs

India is one of the countries with the highest tariffs imposed by Trump in 2025, facing a tax rate of up to 50%。 While negotiating trade with the United States, India is also trying to diversify its export markets, and Middle Eastern and European countries are becoming important export destinations for India. In order to find new markets, India is vigorously promoting the negotiation of new free trade agreements, including the European Union, Canada, Chile, Peru and others.

Varma said the U.S. tariffs have had an impact on India's exports of labor-intensive products, such as textiles, which India faces stiff competition from Southeast and South Asia, especially Vietnam and Bangladesh. "But at the end of the day, India is a domestic demand-driven economy. The overall impact of US tariffs on India is actually less than we and market and policymakers expect. She said.

The reason is that the diversification of India's export market has been realized faster than expected; The Indian government pushed for the largest labor market reform since 1991 this year, which was a long-pending task and was seen as one of the important factors constraining India's manufacturing and investment environment. The Indian government also slashed tax rates on hundreds of goods and services in September, further boosting domestic consumption; In terms of monetary policy, the RBI's diversified mix of focus on reform and monetary and fiscal easing has supported domestic demand. Despite India's high tariffs from the United States, Nomura expects India's GDP to grow by nearly 7.7% in 2025 and 2026 It will also maintain a strong growth rate of 7% in the year.

India was one of the first countries to enter into trade talks with the United States, but when most major economies reached trade agreements with the United States, India faced not only a base tariff of 25%, but also an additional 25% punitive tariff on importing Russian oil.

Varma told Caijing that the main reason why India and the United States are difficult to reach an agreement is agricultural differences and geopolitics. In agriculture, the United States wants India to import more genetically modified crops and more dairy products, but India's agricultural population accounts for more than 50%, and the agricultural lobby opposes open agriculture, so it will be a "difficult negotiation."”, requires India and the United States to make concessions to each other.

On the geopolitical front, the 25% additional tariff facing India is against India's oil imports from Russia. India's oil imports from Russia began to decline in November as the United States imposed sanctions on two Russian companies, Varma said. "Since India will import less oil from Russia, we believe that at least 25% of the punitive tariffs on India should be eliminated. Varma said. Nomura expects India to eventually reach a trade deal with the United States, bringing tariffs down to nearly 20%, close to the average for Southeast Asian countries.

05.Key issues in artificial intelligence

In the past year, the stock prices of companies related to artificial intelligence have risen sharply, especially the "Seven Heroes of U.S. Stocks" represented by Nvidia, Amazon, Microsoft, Google and other companies. Nvidia became the first listed company to exceed $4 trillion and $5 trillion in market capitalization this year.

But market concerns about the AI bubble are also heating up. Su Bowen said that it is not clear whether artificial intelligence will burst the bubble, and the key question in the future is whether investment in artificial intelligence can yield significant returns, such as artificial intelligence being adopted as a general technology around the world, and enterprises incorporating artificial intelligence to redesign production, evaluate organizational structures, and improve productivity. "Our view is that the AI investment boom will continue this year. There can be winners and losers, which is part of the creative disruption of new technologies, but first-mover advantage can make all the difference. ”

From an economist's point of view, Su Bowen believes that artificial intelligence will be a very positive thing in the long run, but he is worried about the side effects of artificial intelligence, and one of the biggest problems is the chaos in the labor market, some jobs may become obsolete, but new jobs will also be created. In this process, governments and policymakers need to clearly understand the problem, help workers retrain, and make the labor market more flexible to avoid serious social problems.

In Su Bowen's view, the current situation is the same as that of the 80s and 90s of the 20th centurySimilar to trade liberalization, economists are talking about the benefits of free trade, how it can gain comparative advantages, how specialization can increase productivity and productivity, reduce product costs, but make the mistake of not fully taking into account the situation left behind by free trade, those who lose their jobs due to manufacturing outsourcing. Ultimately, this led to a strong backlash against free trade. "It is important not to let AI repeat the mistakes of the past, not to let a great technology provoke social opposition to it and ultimately lead to a reversal. It will be very important for policymakers to deal with the societal consequences that AI will bring. ”