Oxford Economics Lifts 2026 APAC Industrial Growth Forecast to 4.9%

Oxford Economics has raised its 2026 industrial production forecast for Asia Pacific to 4.9%, up from 4.3% in April, citing a stronger-than-expected start to the year and AI-driven demand for electronics. The firm is hosting a webinar on 16 June 2026 at 10:00 a.m. Hong Kong time, on its new ON24 platform.

But the upgrade isn’t uniform. The same briefing that lifted the headline number warned that supply disruptions from the US-Iran conflict are dividing the region’s manufacturers into two camps: high-tech electronics players riding the AI capex wave, and energy-intensive industrial sectors exposed to Gulf supply shocks and softer external demand.

Forecast Climbs to 4.9% for 2026

Oxford Economics’ Industries team published the revised forecast in a research briefing on 2 June, walking back a downgrade it had penciled in only weeks earlier. “Our revised forecast for industrial production growth in the region has increased to 4.9% for 2026, up from 4.3% in April,” the firm said, attributing the upgrade to a stronger-than-expected Q1 across the region’s manufacturing hubs. The new figure sits well above the long-run trend for Asian factory output and was set just two weeks before the June webinar.

The session, titled “APAC industry outlook: Navigating Energy Shocks and the AI Boom,” is where Oxford Economics will elaborate on the regional picture. Registration sits on the APAC industry outlook webinar registration page.

Asia is set to remain the brightest spot in the global economy in 2026 in Oxford Economics’ broader outlook, though the firm warned the growth path will be more uneven than in past cycles. “Pessimistic consumers keep a lid on spending” is one of three trends the firm flags for the region, alongside questions over how China’s trade policy and global AI capex will shape regional exports.

The Energy Shock Driving the Split

The reason a single headline number hides so much variation is the energy shock now moving through Asian factory floors. Asia is the main buyer of oil and gas shipped through the Strait of Hormuz, accounting for about 80% of LNG exported through the waterway, according to an April 2026 IMF analysis. Disrupted deliveries of fertilizers, petrochemicals, and materials like helium and sulfur are raising the risk of broader supply-chain disruptions if the conflict persists.

Asia consumes about 38% of the world’s oil and 24% of its natural gas, the IMF estimates, and is one of the largest crude refiners, accounting for about 35% of global refining capacity concentrated in China, India, Korea, and Singapore. The region’s oil and gas use amounts to about 4% of gross domestic product, nearly double Europe’s share, and exceeds 10% in economies such as Malaysia and Thailand, where transport and industry play larger roles. Higher global energy prices are likely to diminish consumers’ purchasing power, especially in durables such as automotive, Oxford Economics said. Read the full breakdown in the analysis of Asia’s energy shock resilience.

AI Electronics Thrives, Old-Line Manufacturing Struggles

Inside the split, AI electronics is doing the heavy lifting. Oxford Economics framed the divergence in a 2 June briefing titled “AI and energy pull in opposite directions in Asia Pacific,” noting that strong AI demand and substantial capital expenditure from US hyperscalers are keeping the high-tech electronics sector on track, with the trend expected to bolster semiconductor production in Taiwan and South Korea and the wider regional supply chain.

China’s chipmakers are already repricing for the same wave: HiSilicon’s AI chip price hike in China. Korea’s memory producers are part of the same chain, with the Nvidia-SK Hynix AI memory co-design deal across the Vera Rubin and RTX Spark platforms. The Korea pact shows the region’s memory specialists are now designing alongside the chip designers, not just supplying them.

Korea is the clearest beneficiary among the region’s major economies, the IMF noted, with strong links to the technology cycle. Demand for semiconductors and related products remained strong through the second half of last year, benefiting economies like Korea, Malaysia, and Singapore that are deeply integrated into tech supply chains. Trade within Asia picked up, while diversification toward the rest of the world helped cushion softer demand from the United States, especially for non-tech exports. Domestic demand across the region, however, stayed uneven, with consumption recovering at different speeds.

Old-line manufacturers face the opposite pressure. Higher energy costs and softer external demand pose significant risks to China’s export-driven sectors, Oxford Economics warned, and the Asian manufacturing sector’s reliance on Gulf hydrocarbons makes it particularly vulnerable to supply disruptions, affecting competitiveness compared to Europe and the US. Petrochemicals and fertilizers are among the inputs now exposed to the same shipping lanes, along with helium used in semiconductor fabrication. The supply squeeze is starting to show up in factory-gate surveys across Southeast Asia, where input-cost gauges have climbed steadily since the spring.

The high-tech electronics sector remains robust, driven by strong AI demand and substantial capital expenditure from US hyperscalers.

Oxford Economics made the assessment in a 2 June 2026 research briefing, available on the firm’s 2 June 2026 briefing on APAC AI and energy. The 16 June webinar will revisit the same figures in light of any new energy-market data.

Sectors and Hubs at the Heart of the Split

Four groups of manufacturers sit at the centre of the split. Sectors most exposed to higher energy bills include durables and automotive, where demand is also softening, and the petrochemicals and fertilizer chains that feed into agriculture and packaging. China’s export-driven sectors, from low-end electronics to machinery, are caught between higher input costs and weaker demand from Western buyers.

The IMF’s adverse-scenario analysis flags net oil and gas importers in South and Southeast Asia, plus Pacific island economies, as the most exposed. Sri Lanka, which depends on imported oil and on remittances and tourism transiting from the Gulf, is named specifically. Lao P.D.R., Nepal, and Myanmar face higher fertilizer costs that could lower incomes and raise food prices. Malaysia and Thailand, where energy use exceeds 10% of GDP, are among the most exposed of the larger Asian economies.

High-tech electronics, semiconductors, and the AI server buildout are escaping the disruption. Korea, Malaysia, and Singapore are part of the supply chain that Oxford Economics says is benefiting from US hyperscaler capex, and are forecast to keep growing through 2026 even if broader manufacturing slows.

• Durables and automotive: hit by both higher energy costs and softer demand.
• Petrochemicals, fertilizers, helium, sulfur: supply chains tied to Hormuz shipping lanes.
• Net oil and gas importers in South and Southeast Asia: Sri Lanka, Cambodia, Bangladesh most exposed per the IMF.
• High-tech electronics, semiconductors, AI server buildout: riding AI demand from US hyperscalers.

Who’s Running the 16 June Session

The 16 June session is led by Makoto Tsuchiya, an economist at Oxford Economics who oversees the forecast and analysis of the electronics sector, including semiconductors. The firm says he produces bespoke forecasts and written reports across a wide range of client projects, and holds a Bachelor’s degree in Economics from Temple University Japan with a minor in Business Studies.

Joining him is Toby Whittington, who runs the Industry Service coverage for the Asia-Pacific region at Oxford Economics, focused on sectoral trends across Asia in key industries such as automotives, chemicals, and high-tech goods. Whittington previously ran the firm’s energy forecasts covering oil and gas and renewables, and is based in Singapore after earlier stints in the UK and US. The session will assess the outlook for regional industrial production, examining the impact of higher energy costs, supply chain disruptions, and weakening external demand, and will discuss prospects for key manufacturing hubs and identify the sectors most exposed to growing risks.

Beyond the Reference Forecast

The IMF’s reference forecast rests on the conflict staying limited in scope and the energy shock fading through 2026. Under that view, the region’s growth moderates from 5% last year to 4.4% this year and 4.2% next, and inflation in emerging Asia rises from 1.1% in 2025 to 2.6% in 2026.

Under the WEO’s adverse scenario, where the energy supply shock is larger and fades more gradually, GDP growth in the major economies of the region would decline by almost 1 percentage point in 2026 relative to the reference scenario, with larger losses in more import-dependent and fossil fuel-intensive economies.

In the severe scenario, where the energy supply shock is even larger and lasts well into 2027 before fading, the major Asian economies face a cumulative output loss of about 2 percentage points by 2027, with headline inflation running 2.3 percentage points higher the same year. Oxford Economics’ revised 4.9% forecast for 2026, published 2 June, is the firm’s current central case.

Frequently Asked Questions

When is Oxford Economics’ APAC industry outlook webinar?

The webinar is scheduled for 16 June 2026 at 10:00 a.m. Hong Kong time, hosted on the ON24 platform, with registration on the Oxford Economics website.

What is the firm’s 2026 APAC industrial production forecast?

Oxford Economics raised its 2026 Asia Pacific industrial production forecast to 4.9% from 4.3% in a 2 June 2026 research briefing, citing a stronger-than-expected Q1.

Why is the US-Iran energy shock hitting APAC manufacturers?

Asia is the main buyer of oil and gas shipped through the Strait of Hormuz, accounting for about 80% of LNG exported through the waterway, so disrupted deliveries ripple through regional supply chains and raise input costs.

Which APAC economies are most exposed to the energy shock?

The IMF flags net oil and gas importers in South and Southeast Asia, plus Pacific island economies, with Sri Lanka, Cambodia, and Bangladesh named, and larger economies Malaysia and Thailand among the most exposed on a regional scale.

Which APAC sectors are benefiting from AI demand?

High-tech electronics, semiconductors, and the AI server buildout are riding strong AI demand and capital expenditure from US hyperscalers, with semiconductor production concentrated in Taiwan and South Korea and spillovers in Malaysia and Singapore.