(Oct 15): The International Monetary Fund expects economic growth in the Asia-Pacific to slow this year and next, warning that rising energy prices and any pullback in the artificial-intelligence boom could test the region’s resilience.
Growth in the Asia-Pacific is projected at 4.8% in 2026, down from 5% last year but above the IMF’s April forecast of 4.4%. This will further moderate to 4.4% in 2027, the Washington-based fund said in its October regional economic outlook report.
The IMF raised its growth forecasts for most advanced economies, with projections revised up “sizably” for the likes of South Korea, Taiwan and Hong Kong that are reaping the benefits of the AI-driven investments surge. It also upgraded its outlook for China and India, while lowering predictions for countries facing higher inflation without comparable gains from technology demand.
The revisions highlight how strong demand for semiconductors, data centers and related technology products has helped cushion parts of Asia against mounting economic pressures. But the gains have been uneven, concentrated in economies plugged into global technology supply chains, the IMF said.
“Think of countries like Bangladesh, Cambodia, Laos, all these countries are importing oil. They are not benefiting from the AI boom that much. So these countries are a lot more vulnerable and they also have fewer policy buffers,” said Krishna Srinivasan, director of the IMF’s Asia and Pacific Department, in an interview with Bloomberg, adding that economies exposed to energy shocks but less integrated into global supply chains face greater risks.
Some countries in Asia are already beginning to factor in a moderation in the AI tech cycle. Singapore’s central bank is expecting the boom to ease in latter half of 2027, following broader concerns from global policymakers about the sustainability of the trillion-dollar investment bonanza that’s betting on AI evolving at breakneck speed.
“Risks remain tilted to the downside,” the IMF said in its report. “A correction in AI-related investment or asset valuations could weigh disproportionately on Asia given its central role in global technology supply chains.”
Growth in emerging Asian markets and developing economies is expected to slow to 5.1% this year from 5.6% in 2025, before easing further to 4.9% in 2027, the fund said. Advanced economies in the region, meanwhile, are projected to expand 3.2% in 2026, up from 2.5% last year, before moderating to 2% in 2027.
The technology boom has also fuelled a rally in Asian equities, with valuations of regional technology stocks rising faster than their US counterparts this year. The IMF warned that elevated valuations, growing investor leverage and market concentration could increase the risk of significant turbulence.
Other risks cited by the report include a prolonged conflict in the Middle East that could keep energy prices elevated, rising global sovereign bond yields and a severe El Niño episode that could disrupt agriculture, fisheries and hydropower generation, adding to food and energy inflation.
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