Asia entered 2026 on a solid footing, according to discussions at the International Monetary Fund’s 2026 Spring Meetings. Although growth remains resilient despite trade pressures, a new energy shock tied to conflict in key commodity regions is expected to weigh on the outlook, raising inflation, weakening external balances, tightening financial conditions, and narrowing policy space. Krishna Srinivasan, Director of the IMF’s Asia and Pacific Department, outlined both the region’s recent resilience and its rising exposure to these risks.
“Growth across most Asian economies turned out stronger than expected in late 2025. This is in large part thanks to exports and consumption - which held up better than anticipated - supported by accommodative policies and financial conditions. With regard to exports, much of the recent strength has been driven by robust demand for tech goods - if you can see on the chart on the left. This has benefited many Asian economies that are deeply integrated into tech supply chains. In addition, trade diversification to the rest of the world, also help cushion softer import demand from the US, especially for non-tech exports. And you can see that on the right-hand side chart. So, Asia's exports to the US declined, but that to the rest of the world increased. As for other growth drivers - which are shown here - consumption recovered at different speeds across countries, while investment - not surprisingly given the uncertainty - remains soft in many economies amid uncertainty and country-specific shocks,” explained Srinivasan.
That resilience is now being tested by a new external shock, as rising oil and gas prices linked to the war in the Middle East introduce fresh uncertainty. The region’s exposure to energy markets makes it particularly sensitive to both the scale and duration of the disruption.
“The use of oil and gas amounts to about 4% of GDP for the region as a whole, although there is variation across countries. Now, this 4%, which I talked about, is nearly double Europe's share. And there's a lot of heterogeneity. For example, oil and gas use exceeds 10% in Malaysia and Thailand, but only 2% in Australia and New Zealand. Second, limited domestic production means that this high energy intensity translates into import dependance. Altogether, net oil and gas imports amount to about 2.5% of GDP for the region, rising to about 8% for some economies such as Singapore and Thailand. And third - we don't show that here - the region is also exposed through non energy inputs, disruptions of fertilizers and petrochemical inputs such as helium and sulfur can create broader supply chain pressures, if the conflict persists,” cautioned Srinivasan.
Momentum carried into the year is expected to partially offset the shock, leaving the overall growth outlook broadly stable under baseline assumptions. Growth is projected to moderate as higher energy costs weigh on consumption and external positions, while inflation rises and policy space becomes more constrained. In this environment, the focus turns to how policymakers navigate the trade-offs and maintain stability.
“The near-term priority is to absorb the shock while preserving space and price signals, starting with monetary policy. So far, inflation expectations remain broadly anchored in 2027 - you can see that in the chart on the right-hand side - which gives central banks some room to look through the first-round rise in headline inflation. But monetary policy should remain agile. A prolonged energy shock could weaken currencies and generate more persistent inflation-to-exchange rate pass through and broader second-run effects,” concluded Srinivasan.
To watch the full press briefing, click here: Press Briefing: Asia and Pacific Department
To read the full report, click here: Asia and Pacific Outlook
