For a rough 2026, China’s economy is heading
China’s macroeconomic outlook appears challenging heading into early 2026. Cyclical factors, such as expiring policy support and a high base, will weigh heavily on economic growth, while structural factors, including the housing recession, remain in play.
The base case for 2026 is that growth will look quite weak in the early months, forcing Beijing to launch more pro-growth measures in the spring, which should help lift growth in the second quarter (Q2) and beyond.
The Chinese economy experienced a mini-cycle over the past year or so. After seeing dire growth numbers in the summer of 2024, Beijing launched several pro-growth policies from September to November 2024. These policies helped boost the economy, with real GDP growth bouncing to 5.4 percent in the fourth quarter (Q4) 2024 and the first quarter (Q1) 2025.
The flip side of the policy-led mini rebound is that a lot of the policies have now expired or are expiring, which is putting pressure on growth. Growth already slowed quite a bit in recent months and could slow further.
The consumer goods trade-in programmes are one of the most important expiring pro-growth policies. They have helped boost sales of consumer electronics and automobiles since September 2024. But that also means that a lot of demand for those products was brought forward. The subsidies allocated for the programmes this Q4 are also smaller than a year ago. Thus, home appliance sales have weakened greatly since the summer, and they even had a double-digit year-on-year (yoy) decline in October and November. If no new subsidies are introduced next year or if they are smaller, sales of home appliances will likely post bigger yoy declines.
Bangladesh: economy is now at a turning point
Bangladesh’s economic success under the previous political regime rested on fragile foundations, with structural weaknesses masked by headline growth. These distortions fuelled a build-up of public debt and one of the world’s highest non-performing loan ratios, estimated at 35.7 percent, reflecting deep abuse in the banking sector.
As confidence eroded, foreign exchange reserves fell by nearly 40 percent between end-2022 and mid-2024, while inflation rose to a 12-year high. An artificially low interest rate cap and aggressive monetary expansion by the Bangladesh Bank intensified price pressures, with weak data transparency obscuring the scale of deterioration and contributing to political upheaval.
The interim government has made progress in stabilising the macroeconomy. Foreign exchange reserves rebounded by more than 30 percent, supported by restrictive import policies and a recovery in remittance inflows following the shift to a market-driven exchange rate. Inflation has moderated, and initial steps have been taken to address the NPL crisis. Yet the recovery remains fragile, with GDP growth slowing to 3.69 percent in FY2025 amid weak business confidence, declining equity-related foreign direct investment and lingering political uncertainty.
Political clarity has therefore emerged as a decisive factor shaping the outlook. While uncertainty surrounding the transition to an elected government has weighed on investor sentiment, the return of Tarique Rahman after a prolonged exile has reduced electoral ambiguity. His emphasis on stability and national unity has improved expectations of policy continuity, supporting a more constructive medium-term outlook, with the IMF projecting growth to rebound to 4.9 percent in 2026.
Despite these stabilisation gains, Bangladesh’s capital market continues to underperform. The DSEX remains near multi-year lows, valuations are deeply compressed and foreign participation has declined sharply, even as regional peers have rallied. This underperformance is structural, driven by a prolonged IPO drought, regulatory inefficiencies, the dominance of bank financing, elevated fixed-income yields and an underdeveloped institutional investor base. These weaknesses reinforce a cycle of low liquidity and weak participation.
IT, Communication services stocks help enlarge Sri Lanka’s equity rally
Sri Lankan shares extended their rally to a ninth straight session on Tuesday, boosted by gains in information technology and communication services stocks. The CSE All-Share index settled 1.21 percent higher at 23,292.91 points. IT sub-index stocks rose 4.48 percent, communication services stocks advanced 3.38 percent. Asia Siyaka Commodities and Cargo Boat Development Company were the top two percentage gainers on the index, up about 24 percent and 18 percent, respectively, on the day. Trading volume on the index rose to 154.7 million shares from 130.6 million shares in the previous session. The equity market’s turnover rose to 6.59 billion Sri Lankan rupees ($21.3 million) from 5.77 billion rupees in the previous session, according to exchange data. Foreign investors were net sellers, offloading stocks worth 133.5 million rupees, while domestic investors were net buyers, purchasing shares worth 6.47 billion rupees, the data showed.
USGS: magnitude 6.7 earthquake strikes near Baculin, Philippines
A 6.7 magnitude earthquake struck off the Philippines’ southern islands on Wednesday, the US Geological Survey (USGS) said, and there were no immediate reports of damage or injuries.
USGS said the quake struck at a depth of 10 km (6 miles) around 68 km (42 miles) east of Baculin, a village in the southern town of Hinatuan in Surigao del Sur province.
Philippine seismology agency Phivolcs, which measured the tremor at 6.4 magnitude and depth of 23 km, warned of damage and aftershocks.
Police and disaster officials near the quake’s epicentre said there were no immediate reports of damage or injuries from the earthquake. “It was not that strong, but people rushed outside,” said Joey Monato, the local police chief of Hinatuan.
Phivolcs director Teresito Bacolcol said by phone that the earthquake’s epicentre was situated less than 10 km from where a pair of strong earthquakes hit in October, killing seven people.
Popular Japanese Sushi chain pays record $3.2 mn
A Japanese sushi restaurant bid 510 million yen ($3.24 million) for a single bluefin tuna on Monday, by far the highest-ever price paid at the annual New Year auction at Tokyo’s Toyosu fish market.
Weighing 243 kg (536 pounds), the prized catch went to Kiyomura Corp, the Tokyo-based operator of popular sushi restaurant chain Sushizanmai.
“I hope the economy will get better this year. The Takaichi administration pledged to work, work, work, so Sushizanmai will work, work, work too,” said Kiyomura chief Kiyoshi Kimura, referring to the 2-1/2-month-old government of Sanae Takaichi, Japan’s first female prime minister. “I hope this bid will cheer everyone up.”
The eye-popping bid beat Kiyomura’s own previous record of 333.6 million yen in 2019.
Malaysia to launch 10-year term limit for PM
Malaysia’s Anwar Ibrahim said Monday he would introduce legislation this year to limit the prime minister’s term to a maximum 10 years, fulfilling one of his campaign promises.
Speaking to ministers and civil servants after a cabinet meeting, Anwar cautioned against clinging to power and reminded them that “everyone has a term limit” without exception.
“We will table a bill to limit the term of the prime minister, not exceeding 10 years or two full terms,” Anwar said in a special New Year’s announcement.
Indonesia: US invasion of Venezuela may hinder economic expansion
The United States (US) invasion of Venezuela is considered not only to impact the stability of the Latin American region but also has the potential to have indirect consequences for Indonesia’s economic interests. The escalation of this geopolitical conflict is considered to narrow the scope for trade and investment expansion in developing countries, including Indonesia.
International politics economic expert of Universitas Muhammadiyah Yogyakarta (UMY), Prof. Faris Al-Fadhat, Ph.D. assessed that this situation increases regional geopolitical risks, impacting global investor perceptions. He believes political uncertainty in Latin America could hamper Indonesia’s efforts to expand its international economic network.
Faris explained that in recent years, Indonesia has begun to view Latin America as a strategic market. The region’s demographic characteristics, consumption potential, and market structure are considered similar to those of Southeast Asia. This makes Latin America a new expansion target for national businesses, both in the private sector and state-owned enterprises (SOEs).
“Indonesia sees Latin America as a future market. However, the main challenge is the region’s political stability,” Faris said when met in his office on Monday (January 5).
He added that the US invasion of Venezuela has only reinforced the perception of Latin America as a region prone to conflict and uncertainty. This situation has direct implications for investment and trade risk calculations, especially for countries that are not major actors in global geopolitics.
“When Indonesia wants to increase trade and investment volume in the region, conflicts like this pose a serious disruption. The significant efforts hat have been made may be outweighed by the guarantee of long-term investment sustainability,” he explained.
These impacts are expected to be even more pronounced if the invasion triggers a strong reaction, both from regional communities and other Latin American countries. Escalating tensions could potentially worsen the business climate and restrict the scope for middle powers seeking new markets and economic opportunities.
India–Maldives trade expands sharply
Bilateral trade between India and the Maldives has recorded a sharp expansion over the past eight years, underscoring the deepening economic partnership between the two neighbours. India’s exports to the Maldives have doubled to about $680 million in FY 2024–25, while imports from the island nation have surged nearly 20 times to $119 million, according to recent data.
The rapid growth in trade mirrors a broader strengthening of economic interdependence, supported by rising Indian tourist arrivals and expanding cooperation across infrastructure, finance, and development sectors.
India–Maldives relations have recently gained renewed momentum following Prime Minister Narendra Modi’s visit to the Maldives, during which the two countries signed eight major bilateral agreements. These include measures to ease Maldives’ debt burden by around 40 percent, a $565 million Line of Credit for infrastructure development, integration of UPI and RuPay payment systems, enhanced cooperation in fisheries, housing initiatives, security collaboration, climate resilience projects, and progress toward a Free Trade Agreement (FTA) and Bilateral Investment Treaty (BIT).
An analysis published by Maldives Insight noted that Indian exports are vital to the Maldivian economy. Petroleum products, pharmaceuticals, and essential food items such as rice, fruits, and vegetables form the backbone of India’s shipments to the island nation. Exports of machinery, electrical equipment, and transport vehicles have also become increasingly important in meeting consumer and infrastructure needs.
Although smaller in absolute value, imports from the Maldives are strategically significant for India, consisting largely of fish and marine products that support India’s seafood processing and export sectors.