Mastercard Economics Institute: APAC growth expected to hold steady in 2025; global policy resets may see shift in gears

Hong Kong’s economy predicted to expand by 2.7 percent in 2025

Uptick expected in consumer discretionary spend, focusing on travel, big-ticket purchases and experiences

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. MEI expects Hong Kong’s economy to expand 2.7 percent in 2025, while the 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. Tailwinds are building for Hong Kong’s economy, driven by a combination of US interest rate cuts, a projected softening of the HKD and increased stimulus in the Chinese Mainland. These are 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.”

Pricing Priorities: Travel “Twins” and Mass Apparel

Consumers worldwide have been navigating a bumpy road of rising prices over the last five years, largely driven by the pandemic and geopolitical tensions. While inflation — the rate of increase in prices — has slowed significantly, price levels themselves remain elevated. As the prices of goods and services rise, purchasing behaviors are shifting gears.

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 in the apparel sector, consumers can access the latest fits in a timely fashion and at affordable prices, even when accounting for global transportation costs, thanks in part to the acceleration of e-commerce options. MEI found that, in terms of YTD spending growth, mass apparel brands are outpacing luxury ones in 85 percent of 26 surveyed countries, with a seven-percentage point difference on average. For merchants based in Hong Kong, Mastercard observed a 2.6 percentage point outperformance in mass market apparel spending growth on a year-on-year basis in the year to date, relative to luxury apparel. This analysis covers both domestic and inbound spending.

"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.”

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.

Policy: Shifting Gears?

Heading into 2025, the Chinese Mainland is taking proactive measures to shore up its economies. 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 economies like the Chinese Mainland 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 markets¹ 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.