Developing Asian Economies Slow to 5.1 Percent Growth Amid Middle East Crisis
Growth across developing Asian economies is projected to slow to 5.1 percent this year, down from 5.6 percent in 2025, driven by climbing oil prices stemming from the escalating Middle East crisis, the International Monetary Fund said on Tuesday during the biannual World Economic Outlook launch at the 2026 Annual Meetings of the International Monetary Fund and the World Bank Group in Bangkok.
While the regional slowdown remains evident, it continues to be tempered by surging global demand for artificial intelligence products. Several emerging Asian economies are tightly integrated into the AI supply chain, benefiting from data center investments and an upturn in the global technology cycle alongside emergency fiscal measures.
China and India Drive Regional Expansion
Silvana Tenreyro, director of the IMF’s research department, identified China and India as the primary engines of growth within the developing Asian region during a news briefing at the report’s launch. Tenreyro noted that the developing Asian region remains the fastest-growing globally, with its outlook surpassing the IMF’s 2026 global growth forecast of 3.1 percent.
Countries such as Malaysia, Singapore, the Republic of Korea, and Vietnam are deeply integrated into the AI supply chain, providing crucial economic resilience despite their status as net energy importers. Global headline inflation is projected to climb to 4.7 percent this year, creating a split global economy where technology-related exports benefit some nations while others absorb heavier import bills.
Downside Risks From Geopolitics and Weather
The IMF warns that growth risks are tilted to the downside due to renewed Middle East tensions, which threaten to push energy and commodity prices even higher. Additional pressures include the impending onset of the El Nino weather phenomenon, which risks disrupting global food supplies.
Higher borrowing costs and rising interest rate payments also threaten to squeeze critical public spending and deplete fiscal buffers needed for future economic shocks. The high concentration of AI supply chains within a select few countries, sectors, and companies creates potential market choke points, leaving the sector vulnerable to market corrections and cybersecurity threats.
Unresolved Risks and Criticisms of IMF Projections
Kevin Gallagher, director of the Boston University Global Development Policy Center, argued that the World Economic Outlook report is overly complacent regarding the region’s underlying vulnerabilities. Gallagher told China Daily that underlying these macroeconomic aggregates, much of Asia faces steep import bills from the Middle East conflict compounded by climate-induced floods and droughts.
According to Gallagher, neither the IMF nor the World Bank brought new instruments to Bangkok to address these compounding risks. It remains unclear how energy-importing economies outside the technology value chain, which face the most difficult economic outlook, will manage these mounting pressures without expanded international support.