Asia’s economic growth is expected to slow over the next two years as rising energy costs, financial market volatility and uncertainty surrounding the artificial intelligence boom create new risks for the region’s economies.
According to Reuters, the International Monetary Fund said Thursday that growth across Asia and the Pacific would moderate from 5.0 percent in 2025 to 4.8 percent in 2026 and 4.4 percent in 2027. The projections were released during the IMF’s annual meetings in Bangkok.
The Fund warned that the conflict in the Middle East has increased energy prices and disrupted financial markets, adding pressure to economies that depend heavily on imported oil and gas.
Emerging Asian economies are expected to remain important drivers of global growth, but their expansion is forecast to slow to 5.1 percent this year from 5.6 percent in 2025.
Meanwhile, advanced Asian economies have benefited from strong demand for artificial intelligence technology, particularly semiconductors and related equipment.
However, the IMF cautioned that a correction in AI-related investment could have significant consequences for the region because of its extensive involvement in the global technology supply chain.
Financial markets have already shown signs of nervousness. South Korea’s KOSPI index fell nearly 8 percent on Thursday, while Japan’s Nikkei declined almost 5 percent amid concerns over technology valuations and higher borrowing costs.
The IMF also warned that tighter monetary policy in the United States and elevated global bond yields could increase financing pressures on Asian governments carrying substantial public debt.
Krishna Srinivasan, director of the IMF’s Asia and Pacific Department, urged central banks to maintain price stability and preserve their independence.
He also recommended targeted, temporary fiscal measures rather than broad fuel subsidies or price controls, which could place additional pressure on government budgets.
The outlook highlights a growing challenge for Asia: sustaining economic expansion while managing the combined effects of geopolitical tensions, energy costs and uncertainty over the profitability of artificial intelligence investments.
