Asia will remain main driver of global growth: IMF

According to the IMF, Asia consumes about 38% of the world's oil and 24% of its natural gas.

Washington: Asia will remain the main driver of global growth with India and China contributing 70 per cent of the regional expansion, the IMF said Thursday, adding that the energy shock due to the Gulf crisis will negatively impact the region.

However, the five per cent regional growth witnessed in 2025, despite the impact of US tariffs and trade uncertainty, is projected to moderate to 4.4 per cent in 2026 and 4.2 per cent in 2027, the International Monetary Fund (IMF) said in its report on the Asia-Pacific segment.

"Asia entered 2026 on a solid footing with growth remaining resilient despite the region bearing the brunt of US tariffs and heightened uncertainty," Krishna Srinivasan, Director for the IMF Asia Pacific Department told reporters.

However, he said, given the region's high fossil fuel intensity and reliance on conflict areas for key commodities, the new energy shock will negatively impact the region.

"The shock is raising inflation, weakening external balances, tightening financial conditions, and narrowing policy space," he said.

According to the IMF, Asia consumes about 38 per cent of the world's oil and 24 per cent of its natural gas.

It's also one of the largest crude refiners, accounting for about 35 per cent of global refining capacity, which is heavily concentrated in China, India, Korea, and Singapore.

Srinivasan said growth across most Asian economies turned out stronger than expected in late 2025. This is thanks to exports and consumption which held up better than anticipated, supported by accommodative policies and financial conditions.

"Asia's exports to the US declined but that to the rest of the world increased," he said.

As for other growth drivers, Srinivasan said consumption recovered at different speeds across countries, while investment, not surprisingly, remained soft in many economies amid uncertainty and country-specific shocks.

"In the context of the war in the Middle East, oil and gas prices have risen sharply, and there is considerable uncertainty about how persistent this shock will be," he said.

Srinivasan said so far, inflation expectations remain broadly anchored in 2027, 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 through exchange-rate pass-through and broader second-round effects," he said.

The Asian region's oil and gas use amounts to about four per cent of gross domestic product, nearly double Europe's share. It exceeds 10 per cent in economies such as Malaysia and Thailand, where transport and industry play larger roles.

The conflict in the Middle East began after the US and Israel launched attacks on Iran on February 28, paralysing global energy markets and disrupting trade.