IMF sees slow growth for economies in Asia

Growth in developing Asian economies is expected to slow to 5.1 percent this year, from 5.6 percent in 2025, as the escalating Middle East crisis continues to drive up oil prices, the International Monetary Fund said on Tuesday.

The biannual World Economic Outlook — launched at the 2026 Annual Meetings of the International Monetary Fund and the World Bank Group in Bangkok — also noted that regional slowdown will be tempered by rising demand for AI products, as several emerging Asian economies are part of the AI supply chain.

Several Southeast Asian economies are expected to benefit from data center investment, the upturn in the global technology cycle, and emergency fiscal measures, the IMF said.

Silvana Tenreyro, director of the IMF's research department, said China and India are the "big engines of growth" in the developing Asian region.

"Overall, (the developing Asian region) is the region that has grown the most," Tenreyro said at a news briefing held at the report's launch.

The IMF's outlook for emerging and developing Asia has surpassed its 2026 global growth forecast of 3.1 percent, with energy-importing economies outside the technology value chain projected to face the "most difficult outlook". Global headline inflation is projected to rise to 4.7 percent this year.

Tenreyro said that despite being net energy importers, the region "has been incredibly resilient", thanks to the AI boom. Countries such as Malaysia, Singapore, the Republic of Korea and Vietnam are "very well integrated in the AI supply chain", she said.

The World Economic Outlook report said the interaction of geopolitics and technology has produced a "split global economy", where technology-related exports and investments benefited some countries, while others have to deal with higher import bills and weaker demand.

Tenreyro said energy exporters outside the conflict region and countries closely integrated in the AI cycle are expected to "fare better", while energy importers and those with limited participation in the AI boom "face weaker growth prospects".

The risks to the growth outlook are "tilted to the downside" amid several factors, including renewed tensions in the Middle East that could lead to higher prices for energy and other commodities, she said.

El Nino disruptions

Other factors include the impending onset of El Nino weather phenomenon, which could disrupt food supply, and higher borrowing costs and interest rate payments, which could crowd out critical spending in other areas and reduce fiscal buffers for future shocks.

The AI boom has been a key global growth driver in recent months, but it is also seen as creating potential choke points.

Tenreyro said this is because AI supply chains are highly concentrated in a few countries, sectors and companies. Likewise, a market value correction and AI threats to cybersecurity could weigh on growth and add financial instability.

"The global economy has been resilient, but that resilience is reaching its limits," she said.

"The task ahead is to move from coping to rebuilding, restoring fiscal space and supply-side resilience, and in that way strengthen countries' ability to grow sustainably."

Kevin Gallagher, director of the Boston University Global Development Policy Center, said the World Economic Outlook report is a "bit too complacent".

"Underneath these aggregates, much of Asia is experiencing steep import bills due to the conflict in the Middle East that are compounded by climate change-related shocks, such as floods and droughts," Gallagher told China Daily.

"The IMF and the World Bank have not come to Bangkok with new instruments to meet this moment, which could accentuate these already grave risks."