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Despite geopolitical noise, growth across ASEAN-6 and India has remained broadly resilient, aided by domestic demand and strong technology exports, while energy prices are gradually filtering through real data and costs/ prices.
In data released yesterday, Indonesia’s economy expanded by 5.3% yoy in 2Q26, with domestic drivers in the lead, especially investment, followed by consumption, while net trade was a drag. On the supply side, services continued to outperform goods-related sectors. With growth averaging 5.4% yoy in 1H26, we revise up our annual 2026 growth forecast to 5.3% from 5.1%. According to advance estimates, Singapore and Malaysia registered above-trend growth of 5.7% yoy and 5.8% yoy, respectively, in 2Q26, amid strong AI-driven exports. Final releases next week will likely confirm this resilient performance, which should sustain in 2H26, albeit moderate from the blistering pace in 1H (see report and note). Vietnam was the regional outperformer, expanding by 8.4% yoy on the back of export-oriented manufacturing and FDI momentum (see note).
The Philippines lags the region, with the 2Q growth report, due today, expected to show signs of bottoming out, but at a modest 3.0% yoy from 2.8% in the previous quarter. India will release its GDP numbers with a considerable lag in late-August, with the read expected to show a strong beat at 7.3-7.4% yoy from 7.8% the quarter before, displaying relative resilience despite difficult external forces.
On inflation, July readings have generally moderated, reflecting either delays in the pass-through of domestic fuel price adjustments or the easing of global energy prices, which have alleviated domestic price pressures. Besides oil, the region will be watchful of El Niño-related developments and the impact on domestic farm output as well as global food indices. India's July inflaton, by contrast, will grind higher as past retail pump price increases and higher food prices gradually filter through to the headline print. Philippines’ inflation remains the highest in the region, with July’s print of 6.2% yoy still breaching the central bank’s target, despite easing from its recent peak.
We expect the region to extend a pause on rates in 3Q26 to preserve policy ammunition, with a few exceptions. Philippines’ BSP retained its hawkish rhetoric, increasing the likelihood of a follow-up rate hike on 27 Aug to rein in inflationary expectations. Singapore’s MAS remained among the most proactive in the region, very slightly raising the slope of the SGD NEER policy band in its July review, marking a back-to-back tightening following its move in April, to contain a pickup in inflation from July (see report). India’s RBI monetary policy committee (MPC), however, struck a patient tone at Wednesday’s meeting, delivering guidance that proved to be less hawkish than expected. The MPC preserved flexibility while assessing whether recent inflation pressures remain temporary or would evolve into a broader generalised upcycle. FY27 headline and core inflation projections were lowered. We see limited scope for a rate hike at the October meeting, consistent with our baseline expectation that policy rates remain unchanged throughout the rest of FY27. Provided US-Iran tensions remain at bay, DBS FX strategist recently noted that growing international scrutiny on competitive currency weakness will create room for a gradual recovery across Asian currencies, including those that have been disproportionately weighed down by US tariffs and geopolitical tensions in the Middle East, which include few of the Southeast and South Asian currencies. 
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