IMF Sees Slower Asian Growth as Energy Costs and Rising Bond Yields Pose Risks
The IMF forecast Asia’s economic growth would slow from 5% in 2025 to 4.8% in 2026 and 4.4% in 2027, citing energy shocks, rising bond yields and AI investment risks.
ASIA,ECONOMY
Global N Press
10/16/20262 min read
BANGKOK, October 15, 2026 — The International Monetary Fund (IMF) projected that Asia’s economic growth would slow to 4.8% in 2026 and 4.4% in 2027, from 5% in 2025, citing risks from energy price shocks linked to the conflict in the Middle East, rising global bond yields and a potential correction in artificial intelligence investment.
The projections, released during the IMF’s annual meetings in Bangkok, were higher than the fund’s April forecasts. However, the IMF cautioned that geopolitical tensions, tighter financial conditions and shifts in technology-related investment could weigh on the region’s economic outlook.
Emerging Asia Faces Higher Energy Costs
Emerging Asian economies are expected to remain the region’s main growth driver, although their combined growth rate is projected to ease to 5.1% in 2026 from 5.6% in 2025.
Higher energy prices could increase production and transportation costs, erode household purchasing power and complicate efforts to contain inflation. The impact is likely to vary across economies, depending on their reliance on imported energy, domestic demand and capacity to respond through policy measures.
A prolonged disruption linked to the conflict in the Middle East could further raise costs for energy-importing economies and weigh on regional growth.
AI Demand Supports Advanced Asian Economies
Advanced Asian economies, including Japan and South Korea, are expected to benefit from demand for artificial intelligence and related technologies. Their combined growth rate is projected to rise to 3.2% in 2026, from 2.5% in 2025.
Investment in AI infrastructure and demand for semiconductors have supported economic activity in parts of the region. However, the IMF warned that a potential correction in AI-related investment could weaken this support, particularly in economies and industries closely linked to the technology supply chain.
Rising Bond Yields Add Financial Pressure
Uncertainty over U.S. monetary policy could increase exchange-rate volatility and trigger capital outflows from some emerging Asian markets, the IMF warned.
Meanwhile, rising government bond yields in major economies, including the United States, Britain, the euro area and Japan, could put upward pressure on borrowing costs across Asia. Higher yields may increase government financing expenses and make debt refinancing more costly.
Countries with high public debt could face additional pressure on their budgets, potentially limiting their capacity to fund public investment and other spending priorities.
IMF Recommends Targeted Policy Support
The IMF recommended that Asian central banks prioritize price stability and respond promptly if inflationary pressures persist.
On fiscal policy, the fund advised governments to avoid broad-based fuel subsidies and price controls, favoring temporary, targeted assistance for vulnerable households and businesses. Such measures could help cushion the impact of higher energy costs while limiting fiscal burdens and distortions in market prices.
Asia’s growth outlook remains relatively resilient, but the IMF’s projections highlight the risks facing the region over the next two years. Energy prices, global financial conditions and the trajectory of AI investment will be important factors shaping the region’s economic performance.
