IMF projects slower Asian growth amid energy shock and rising bond yields

The International Monetary Fund released an Asia-Pacific outlook in Bangkok, projecting that the region’s economic expansion will moderate to 4.8% in 2026 and 4.4% in 2027 after a 5.0% rise in 2025. The slowdown reflects pressures from the Iran-related energy shock, potential corrections in the AI boom, and spillovers from climbing global bond yields. The fund noted increased volatility in exchange rates and capital flows, with emerging markets facing depreciation pressures and some portfolio outflows, notably from South Korean technology equities.

It warned that a stalemate in the Middle-East could keep commodity prices high, while a dip in AI demand would hit Asia’s extensive AI supply chain. Rising yields in major sovereign markets may raise Asian bond costs, aggravating fiscal vulnerabilities, and the IMF urged central banks to focus on price stability and for governments to use targeted, temporary fiscal measures.