Asia Pacific tech spending outlook dims as tariffs bite in 2025

Forrester has suggested that evolving tariff negotiations between the US and China are likely to dampen the outlook for technology spending in Asia Pacific, with 2025 growth forecasts now under threat.

The research firm had previously projected that technology spending across the Asia Pacific (APAC) region would grow by 6.5% in 2025, reaching USD $722 billion, compared to USD $678 billion in 2024. This growth projection, which matched last year's expansion, is now expected to be revised downward by 1 to 2 percentage points as the introduction of broad-based US tariffs increases technology costs, disrupts regional supply chains, and heightens uncertainty in IT investment plans.

Forrester has warned that while projections originally anticipated a positive trajectory, current political and economic headwinds linked to tariffs could impact specific countries and IT categories to varying degrees. The uncertainty may lead firms to delay or reduce spending in certain areas, especially where exposure to global supply chain risk is higher.

Despite these potential setbacks, Forrester believes that the adoption of artificial intelligence (AI) and cloud technology will remain strong across the region. Demand for digital infrastructure continues to gain momentum, fuelling robust growth for software and IT services. The software market is forecast to expand by 10.4% in 2025, with AI and cloud services accounting for a large share. IT services, meanwhile, are expected to grow by 6%, spurred on by the increasing need for hybrid cloud solutions, cybersecurity consulting, and system integration to address complex regulatory environments.

Growth is particularly noticeable in Southeast Asian economies, where digital transformation initiatives are gathering pace. Forrester notes that fundamental drivers of expansion — including AI, cloud, and digital infrastructure — remain in place, even as economic conditions in the region become more volatile.

Specific country forecasts demonstrate the diversity of expected outcomes within APAC. In Australia, technology spending is predicted to rise by 6.6% to nearly AUD $79 billion (approximately USD $52.4 billion), supported by investments in cybersecurity, generative AI, and cloud solutions. China is forecasted to experience a 7.7% increase, taking total tech spending to RMB 1.9 trillion (around USD $264 billion), underpinned by government policies aimed at boosting consumption, accelerating economic recovery, and enhancing technological self-sufficiency.

India is set to achieve an 11% rise, with technology spending reaching ₹5 trillion (approximately USD $59 billion), fuelled by solid enterprise investment, government digitisation efforts, and a surge in venture capital. Singapore's spending is projected to increase by 5.6% to SGD $25.5 billion (about USD $19 billion), as AI adoption spreads across major industries and the government rolls out the Digital Connectivity Blueprint.

Forrester also highlights strong prospects for Southeast Asia, predicting technology spending growth rates of 8.5% in Indonesia, 7.2% in Malaysia, 9.4% in the Philippines, 7.7% in Thailand, and 10% in Vietnam, with total spending in the region reaching approximately USD $69 billion. Governments across Southeast Asia are actively encouraging digital transformation, with an emphasis on cybersecurity and the use of AI for threat detection and online safety.

Frederic Giron, Vice President and Senior Research Director at Forrester, commented, "Asia Pacific's tech spending growth continues to demonstrate the region's commitment to leveraging technology to build resilience and drive innovation in an uncertain global climate, but the immediate economic headwinds and heightened uncertainty stemming from the new tariffs are likely to influence the pace, prioritisation, and funding of technology initiatives in the coming months. Business and tech leaders must engage in comprehensive scenario planning to anticipate various outcomes and develop adaptive strategies that ensure organisational resilience."

Addressing the local context, Sam Higgins, Vice President and Principal Analyst at Forrester, said, "Forrester's latest insights highlight the dual challenge and opportunity for Australian organisations navigating today's global trade dynamics. With Australia's tech spending projected to grow moderately in 2025, local leaders are prioritising investments in cybersecurity, generative AI, and cloud solutions despite fluctuating economic conditions. However, rising costs driven by global vendor pricing pegged to the US dollar, tariffs on imported technology, and a significant talent shortage will require businesses to adopt innovative and resilient strategies. By refactoring cloud-hosted legacy applications and focusing on AI-enabled efficiency efforts, Australian organisations can mitigate cost pressures, address the impact of tariffs, and continue to drive technology-enabled transformation in a rapidly evolving landscape."

Forrester expects that while the forecasts for technology spending across Asia Pacific may be downgraded as a result of global trade and tariff developments, strong demand for AI, cloud, and modernisation programmes will remain central to the region's ongoing investment agenda.