{ "title": "Asia Can Boost Economic Resilience Amid Surging Trade Tensions", "publication": "IMF Blog, April 24, 2025", "sourceUrl": "https://www.imf.org/en/blogs/articles/2025/04/24/asia-can-boost-economic-resilience-amid-surging-trade-tensions", "canonical": "https://www.imf.org/en/blogs/articles/2025/04/24/asia-can-boost-economic-resilience-amid-surging-trade-tensions", "overlayPath": "/en/blogs/articles/2025/04/24/asia-can-boost-economic-resilience-amid-surging-trade-tensions/index.md", "summary": "Stronger regional economic ties can help build resilience during a time of growing policy uncertainty", "sections": [ { "heading": "Overview", "content": "- US tariffs are the highest in a century, with some of the steepest aimed at Asia.\n- Asia accounted for nearly 60 percent of global growth in 2024.\n- Trade policy uncertainty has increased amid escalating tensions between the United States and China.\n- The region’s export-led growth model faces mounting challenges from weaker global demand, reduced trade, tighter financial conditions, and heightened uncertainty." }, { "heading": "Growth projections and near-term risks", "content": "- Reference forecast: regional growth projected to slow to 3.9 percent in 2025 from 4.6 percent in 2024.\n- The slowdown reflects a downgrade of 0.5 percentage point—described as the sharpest since the pandemic.\n- Projected growth for 2026: 4 percent (also slower than previously forecast).\n- Advanced economies in the region: growth likely to be 1.2 percent in 2025, a downward revision of 0.7 percentage point compared to January.\n- Japan: growth projected to increase to 0.6 percent in 2025 from 0.1 percent in 2024 (real wage pickup expected to support consumption).\n- Emerging market and developing economies (EMDEs) in the region: growth projected at 4.5 percent in 2025, a downward revision of 0.5 percentage point.\n- China: fiscal expansion in the 2025 budget expected to partially offset tariff impacts; growth downgraded to around 4 percent in 2025 and 2026.\n- India: growth projected to slow moderately to 6.2 percent in 2025 and 6.3 percent in 2026.\n- ASEAN: growth downgraded to 4.1 percent in 2025 due to external shocks and domestic demand weakness in some economies.\n- Downside risks: greater trade tensions, tighter financial market conditions, and increased uncertainty.\n- Upside possibilities: diversification of export markets, new trade agreements, and renewed structural reform momentum." }, { "heading": "Transmission channels and vulnerabilities", "content": "- Tariffs will weigh on the global economy and dent the region’s post-pandemic momentum because exports have led growth in many emerging economies amid lackluster domestic demand.\n- High household borrowing in some economies has weighed on consumer spending and increased debt-service burdens.\n- Asian exports to the United States and other advanced economies have been strong, especially for high-technology products and AI-driven demand—raising vulnerability to fluctuating US demand and rising protectionism.\n- Structural headwinds: population aging and decline in some countries, and a recent trend of declining productivity." }, { "heading": "Rebalancing and diversification policy priorities", "content": "- Need for a more balanced growth model: stronger and structurally durable domestic demand in some countries, greater diversification of exports, and stronger regional economic ties.\n- Boosting private consumption requires structural policy action:\n - More effective social safety nets to reduce precautionary savings and foster confidence (noted as a step in the right direction in China).\n - Where household debt is high: coordinated measures to restructure debt for heavily burdened households, improved financial literacy, and prevention of excessive borrowing. Thailand examples: repayment assistance and debt restructuring programs.\n - Boost private investment via labor market reforms, improvements in the business environment, and investments in health and education to build human capital.\n- Further diversify export markets and deepen regional integration:\n - Significant scope for more intra-regional trade in ASEAN through greater integration in trade and financial spheres.\n - The Regional Comprehensive Economic Partnership (RCEP) can deepen cooperation in goods, services, the digital economy, and regulatory harmonization.\n - Digital capabilities increasingly critical; Singapore noted as highly digitally competitive, Korea and India lead in digital government services." }, { "heading": "Fiscal, monetary, and financial policy guidance", "content": "- Policies must be flexibly calibrated and tailored to country circumstances.\n- Fiscal trade-off:\n - Rebuild fiscal buffers after pandemic-related debt increases is critical for resilience.\n - At the same time, fiscal policy should cushion near-term external demand shocks.\n- Recommended policy mix where appropriate:\n - Targeted and time-bound support to vulnerable people and companies, especially in hard-hit export sectors.\n - Carefully select public investment to sustain demand.\n - Support with monetary easing where inflation is near or below target, and allow exchange rates to act as shock absorbers.\n - Manage financial stability risks from disorderly market movements using an integrated policy framework.\n - Adopt credible strategies for consolidation in coming years, typically gradual fiscal adjustment anchored in a well-defined medium-term framework, including improving public spending efficiency and tax reforms to raise revenue.\n- Country examples:\n - India: introduced a new policy to contain debt at a set level and efforts to raise revenues by promoting tax administration efficiency while safeguarding social spending.\n - Mongolia: strengthened fiscal rules to enhance transparency, accountability, and long-term fiscal anchors.\n - Korea: aims to introduce a formal fiscal rule (legislation pending in parliament).\n - Sri Lanka: under IMF-supported program, achieved significant revenue mobilization and deficit reduction since 2022, with tax revenues rising and the fiscal deficit narrowing markedly." }, { "heading": "Structural reforms and long-term resilience", "content": "- Productivity growth in Asia has slowed over the past decade, particularly in emerging economies.\n- Adoption of artificial intelligence and other advanced technologies could help reverse productivity declines if supported by investments in skills, infrastructure, and regulatory frameworks.\n- Digitalization can increase productivity and generate new jobs, particularly in services.\n- Complementary reforms needed: deepen capital markets, enhance financial inclusion, and improve governance.\n- For Pacific Island countries, resilience to natural disasters and climate change is paramount; access to climate finance is critical." }, { "heading": "Strategic conclusions and policy imperatives", "content": "- Asia’s export-led model delivered unprecedented prosperity, but changing global conditions require reorientation.\n- Policymakers should:\n - Use fiscal policy judiciously to support near-term growth where hit hardest, while committing to reducing the fiscal deficit in the next five years.\n - Unlock domestic market potential through structural reforms.\n - Forge stronger regional ties to build collective resilience.\n- Smart policy choices can help Asia evolve from “the world’s factory” into a dynamic, resilient, and integrated economic power.\n\nThomas Helbling, Andrea Pescatori, Krishna Srinivasan — April 24, 2025\n\n---\n\n Content in this bundle\n\n- APD REO Note: Asia-Pacific's Structural Transformation: The Past and Prospects\n - APD REO Note: Asia-Pacific's Structural Transformation: The Past and Prospects (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n - APD REO Note: Asia-Pacific's Structural Transformation: The Past and Prospects (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\n References\n\n- Thailand\n- strengthened\n- particularly in services\n\nSource: https://www.imf.org/en/blogs/articles/2025/04/24/asia-can-boost-economic-resilience-amid-surging-trade-tensions" } ], "bullets": [ "[Markdown version](/en/blogs/articles/2025/04/24/asia-can-boost-economic-resilience-amid-surging-trade-tensions/index.md)", "[Structured JSON version](/en/blogs/articles/2025/04/24/asia-can-boost-economic-resilience-amid-surging-trade-tensions/index.json)", "[Bundle manifest](/en/blogs/articles/2025/04/24/asia-can-boost-economic-resilience-amid-surging-trade-tensions/bundle-manifest.json)", "Authors: Thomas Helbling, Andrea Pescatori, Krishna Srinivasan", "Published: April 24, 2025", "US tariffs are the highest in a century, with some of the steepest aimed at Asia.", "Asia accounted for nearly 60 percent of global growth in 2024.", "Trade policy uncertainty has increased amid escalating tensions between the United States and China.", "The region’s export-led growth model faces mounting challenges from weaker global demand, reduced trade, tighter financial conditions, and heightened uncertainty.", "Reference forecast: regional growth projected to slow to 3.9 percent in 2025 from 4.6 percent in 2024.", "The slowdown reflects a downgrade of 0.5 percentage point—described as the sharpest since the pandemic.", "Projected growth for 2026: 4 percent (also slower than previously forecast).", "Advanced economies in the region: growth likely to be 1.2 percent in 2025, a downward revision of 0.7 percentage point compared to January.", "Japan: growth projected to increase to 0.6 percent in 2025 from 0.1 percent in 2024 (real wage pickup expected to support consumption).", "Emerging market and developing economies (EMDEs) in the region: growth projected at 4.5 percent in 2025, a downward revision of 0.5 percentage point.", "China: fiscal expansion in the 2025 budget expected to partially offset tariff impacts; growth downgraded to around 4 percent in 2025 and 2026.", "India: growth projected to slow moderately to 6.2 percent in 2025 and 6.3 percent in 2026.", "ASEAN: growth downgraded to 4.1 percent in 2025 due to external shocks and domestic demand weakness in some economies.", "Downside risks: greater trade tensions, tighter financial market conditions, and increased uncertainty.", "Upside possibilities: diversification of export markets, new trade agreements, and renewed structural reform momentum.", "Tariffs will weigh on the global economy and dent the region’s post-pandemic momentum because exports have led growth in many emerging economies amid lackluster domestic demand.", "High household borrowing in some economies has weighed on consumer spending and increased debt-service burdens.", "Asian exports to the United States and other advanced economies have been strong, especially for high-technology products and AI-driven demand—raising vulnerability to fluctuating US demand and rising protectionism.", "Structural headwinds: population aging and decline in some countries, and a recent trend of declining productivity.", "Need for a more balanced growth model: stronger and structurally durable domestic demand in some countries, greater diversification of exports, and stronger regional economic ties.", "Boosting private consumption requires structural policy action:", "Further diversify export markets and deepen regional integration:", "Policies must be flexibly calibrated and tailored to country circumstances.", "Fiscal trade-off:", "Recommended policy mix where appropriate:", "Country examples:", "Productivity growth in Asia has slowed over the past decade, particularly in emerging economies.", "Adoption of artificial intelligence and other advanced technologies could help reverse productivity declines if supported by investments in skills, infrastructure, and regulatory frameworks.", "Digitalization can increase productivity and generate new jobs, particularly in services.", "Complementary reforms needed: deepen capital markets, enhance financial inclusion, and improve governance.", "For Pacific Island countries, resilience to natural disasters and climate change is paramount; access to climate finance is critical.", "Asia’s export-led model delivered unprecedented prosperity, but changing global conditions require reorientation.", "Policymakers should:", "Smart policy choices can help Asia evolve from “the world’s factory” into a dynamic, resilient, and integrated economic power.", "**APD REO Note: Asia-Pacific's Structural Transformation: The Past and Prospects**", "[Thailand](https://www.imf.org/en/News/Articles/2025/04/09/cf-thailand-can-ease-household-debt-burden-by-using-coordinated-approach)", "[strengthened](https://www.imf.org/en/News/Articles/2024/11/26/cf-tighter-fiscal-policy-can-help-mongolia-control-inflation)", "[particularly in services](https://www.imf.org/en/Blogs/Articles/2024/10/31/asias-economies-can-embrace-services-to-boost-growth-and-productivity)" ], "related": [ { "title": "APD REO Note: Asia-Pacific's Structural Transformation: The Past and Prospects", "role": "document", "sourceUrl": "https://www.imf.org/-/media/files/publications/reo/apd/2024/october/english/reoapdnote.pdf", "summary": { "path": "/-/media/files/publications/reo/apd/2024/october/english/reoapdnote.pdf.md", "mime": "text/markdown" }, "binary": { "path": "/-/media/files/publications/reo/apd/2024/october/english/reoapdnote.pdf", "mime": "application/pdf" } } ], "alternates": { "markdown": "/en/blogs/articles/2025/04/24/asia-can-boost-economic-resilience-amid-surging-trade-tensions/index.md", "json": "/en/blogs/articles/2025/04/24/asia-can-boost-economic-resilience-amid-surging-trade-tensions/index.json", "bundleManifest": "/en/blogs/articles/2025/04/24/asia-can-boost-economic-resilience-amid-surging-trade-tensions/bundle-manifest.json" }, "generatedAtUtc": "2026-08-25T17:35:37.272Z" }