01/05/2026
IMF SAYS ASIA TO REMAIN KEY DRIVER OF GLOBAL GROWTH DESPITE ENERGY AND INFLATION PRESSURES.........................................................
Asia is expected to remain the main engine of global economic growth, although regional expansion is projected to moderate in 2026 and 2027, according to the International Monetary Fund’s April 2026 Regional Economic Outlook for Asia and Pacific and World Economic Outlook reports.
The IMF projects Asia’s economic growth to slow from 5 percent in 2025 to 4.4 percent in 2026 and 4.2 percent in 2027. China and India are expected to remain the largest contributors to regional expansion, together accounting for about 70 percent of Asia’s growth.
Inflation across the region is also expected to rise in the near term. The IMF forecasts inflation in Asia to increase from 1.4 percent in 2025 to 2.6 percent in 2026, before easing slightly to 2.4 percent in 2027. While inflationary pressures have eased in Japan, they remain more persistent in Australia, where the 2026 inflation forecast has been revised upward significantly.
Among major economies, China’s growth forecast for 2026 has been revised up by 0.2 percentage points to 4.4 percent. Japan’s economy is projected to grow by 0.7 percent in 2026, with growth expected to remain around the same level in 2027.
The IMF also warned that higher oil and gas prices linked to the Middle East conflict could place additional pressure on Asian economies. Rising energy costs are expected to increase inflation, widen trade deficits, and reduce governments’ ability to respond, particularly in countries that depend heavily on imported fuel. Net oil and gas imports are estimated to account for about 2.5 percent of regional economic output.
Asia entered 2026 with relatively strong momentum, supported by resilient growth in 2025 and robust trade performance despite ongoing trade tensions. However, the IMF noted that higher energy prices could weigh on consumption and external balances, making the outlook less favorable.
Several economies remain particularly vulnerable to external shocks. In agriculture-dependent countries such as Lao P.D.R., Nepal, and Myanmar, higher fertilizer prices could reduce household incomes and push up food prices. Sri Lanka also faces risks due to its reliance on imported oil, remittances, and tourism flows linked to the Gulf region.
Under the IMF’s adverse scenario, in which the energy supply shock becomes larger and more persistent, GDP growth in major Asian economies could fall by nearly 1 percentage point in 2026 compared with the baseline forecast. The impact would be greater in economies that are more dependent on energy imports and fossil fuels.
The IMF said the near-term policy priority for Asian economies is to absorb the impact of the shock while preserving fiscal space and maintaining effective price signals. It also noted that inflation expectations are expected to remain broadly anchored in 2027.
The latest IMF outlook highlights Asia’s continued importance to the global economy, while also pointing to significant risks from energy market volatility, inflation pressures, and external trade challenges.
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