IMF, slowing Asian economy, Iran war risks and yield crisis

Growth in Asian economies will slow next year amid growing risks related to the war-induced energy shock in Iran, a potential correction to the AI ​​boom and contagion effects from rising global bond yields.

The IMF writes this in a report on the prospects of the Asia-Pacific region, also warning that uncertainty over the path of US monetary policy could keep Asian financial markets volatile. “Exchange rates and capital flows have become more volatile since the energy shock occurred this year,” with several emerging economies experiencing devaluation pressure, the IMF wrote in a report released at its annual meetings in Bangkok. "U.S. monetary policy is expected to continue tight through the end of the year. The combination of monetary policy stringency and fiscal pressures in most major advanced economies is expected to maintain upward pressure on yields across Asia and the Pacific."

The IMF now expects the Asian economy to grow by 4.8% in 2026 and 4.4% in 2027, better than April's projections, but still slowing down from the 5.0% expansion in 2025. "Risks to the outlook remain oriented to the downside," warns the IMF, because a prolonged stalemate in the conflict in the Middle East could keep raw material prices high and erode oil reserves.