IMF warns of slowing Asian growth, spillover from rising yields

The International Monetary Fund has forecast slower growth in Asia for 2026 and 2027, projecting an expansion of 4.8% and 4.4%, respectively. These projections are lower than the 5.0% and 5.6% growth rates seen in 2025. The IMF warns that rising global bond yields, spillovers from higher energy prices, and uncertainty surrounding the US monetary policy could further cool Asian economic growth.

The AI boom is expected to accelerate growth in advanced Asian economies, but this could wane with a potential correction in AI demand, particularly affecting the region's extensive exposure to the AI production chain. Heightened energy costs and a prolonged conflict in the Middle East could also contribute to higher commodity prices, stressing Asian economies already grappling with high public debt and fiscal vulnerabilities.

The IMF urges Asian central banks to prioritize price stability and act swiftly against persistent inflation, while cautioning against blanket fuel subsidies or price controls that could be detrimental in the long run.