The International Monetary Fund expects Asia's growth to slow to 4.4% in 2027 from 4.8% in 2026. It points to an energy shock tied to the Iran war, a possible correction in artificial intelligence, and rising global bond yields as risks.
The IMF projected that Asia's economic growth will moderate in 2027, citing risks from an energy shock linked to the Iran war, a possible correction in the AI sector and rising global bond yields. The lender released its Asia-Pacific outlook during its annual meetings in Bangkok.
The fund now expects growth of 4.8% in 2026 and 4.4% in 2027. Both figures are higher than April's projections, yet they trail the 5.0% expansion in 2025.
US policy uncertainty could keep Asian markets volatile
The IMF said uncertainty over the U.S. monetary policy path could keep Asian financial markets volatile. According to the report, exchange rates and capital flows have become more volatile since this year's energy shock, and several emerging economies face depreciation pressures.
Foreign investment inflows remain generally robust, but some portfolio outflows have occurred, including from South Korean technology stocks, the IMF said. The fund also said the U.S. monetary stance is expected to continue tightening later this year. It added that tightening combined with fiscal pressures in most major advanced economies is likely to keep upward pressure on yields across Asia and the Pacific.
AI boom lifts advanced Asia while emerging Asia slows
The growth revisions largely reflected the AI boom's boost to advanced Asian economies, whose growth is expected to accelerate to 3.2% in 2026 from 2.5% last year. Emerging Asia remains the region's main growth engine, but its growth will likely moderate to 5.1% in 2026 from 5.6% last year because of higher energy prices, the report said.
The IMF warned that risks to the outlook remain tilted to the downside. A prolonged stalemate in the Middle East conflict could keep commodity prices high and deplete oil reserves. A correction in AI demand could weigh on global growth, with effects likely to be particularly pronounced in Asia given its extensive exposure to the AI production chain.
Source: Investing.com
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