Asia’s Economic Growth Is Weathering Tariffs and Uncertainty

IMF Blog, October 16, 2025

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Growth in the Asia and Pacific region is likely to slow to 4.1 percent next year from 4.5 percent this year.
China’s economic growth is forecast to slow from 4.8 percent this year to 4.2 percent next year.
Japan’s growth decelerates from 1.1 percent to 0.6 percent.
India will expand at 6.6 percent this year and slow to 6.2 percent next year.
Korea’s growth will accelerate from 0.9 percent this year to 1.8 percent next year.
ASEAN economies will expand by 4.3 percent for a second straight year.
Asia will remain the biggest driver of global growth, contributing about 60 percent this year and next.
Inflation is likely to remain moderate.

Front-loading of exports ahead of new levies contributed to a first-quarter surge in shipments that cooled in the following three months.
Stronger-than-expected investment in artificial intelligence bolstered exports of advanced technology from economies including Korea and Japan.
Ongoing supply-chain reconfiguration within the region shifted a larger share of intermediate goods to—and through—Southeast Asia and other hubs.
Monetary easing across many economies and targeted fiscal support in some countries (notably China, Korea, Indonesia, and Vietnam) supported growth and cushioned external-demand shocks.
Financial conditions eased across much of Asia, reflecting the depreciation of the dollar, compressed credit spreads, higher stock-market valuations and, in emerging economies, lower government bond yields.

Renewed escalation of tariffs and more rules-of-origin restrictions to avoid transshipments.
Further supply-chain disruptions.
Tighter global financial conditions.
Trade-policy reset centered on Asia, including the United States in April raising effective tariff rates to multi-decade highs (rates remain high even after various pauses, agreements, and reinstatements).
Weakening historical growth engines: demographic aging, slowing productivity growth because investment isn’t always reaching the most dynamic firms, post-pandemic scarring weighing on domestic demand in emerging Asia, widened external imbalances.
Social strains from lack of jobs and opportunities, especially where institutions are weaker and perceptions of corruption are widespread.

Pursue measured monetary easing where inflation is below target.
Use exchange-rate flexibility to absorb shocks; reserve intervention for disorderly conditions in line with the IMF’s Integrated Policy Framework.
Implement temporary, targeted fiscal measures to protect the most vulnerable people and support viable businesses.
Streamline regulations and improve the business environment to unleash the private sector.

Prioritize expanding the share of private consumption in the economy by strengthening social safety nets to reduce precautionary saving.
Scale back industrial policies.
In China, repair balance sheets and complete pre-sold homes to help restore confidence in housing markets and boost private consumption.
Repair public finances across the region to protect against shocks and meet needs without raising private sector borrowing costs.

Channel capital to its most productive uses by removing regulatory obstacles and addressing high borrowing that have weighed on investment and productivity.
Broaden market-based finance, deepen stock and bond markets, and help borrowers restructure debt to better allocate capital and support viable enterprises.
Deepen regional integration to increase competition and productivity, cut costs, and diversify markets.
Lower non-tariff barriers, expand trade agreements to reflect the growing role of services and digital trade, and ease restrictions on foreign direct investment to attract investment and complement supply-chain reconfiguration.
Note that South Asia’s services industries are relatively closed, indicating scope for liberalization.

Resilience endures, but mounting headwinds are straining a growth engine already challenged by the trade-policy reset.
Countries should rebalance toward domestic demand, fortify medium-term fiscal frameworks, and deepen regional trade and financial integration to keep growth durable and inclusive.

—This blog is based on the October 2025 Asia-Pacific Regional Economic Outlook, “Navigating Trade Headwinds and Rebalancing Growth.”