Press Briefing Transcript: Asia-Pacific Department, Annual Meetings 2025
IMF News, October 16, 2025
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- Published: October 16, 2025
Regional growth and outlook
- Asia-Pacific projected to grow by 4.5 percent in 2025 and moderate to 4.1 percent in 2026.
- The region is expected to contribute about 60 percent of global growth both this year and in 2026.
- Downside scenario discussed: global growth next year could slow from 3.1 percent to 2.8 percent if downside risks materialize.
Drivers of resilience
- Three key factors underpinning resilience:
- Strong exports (including front-loaded shipments ahead of tariff hikes).
- AI-driven tech boom lifting high‑tech exports, notably from Korea and Japan.
- Accommodative macro policies in many countries, reinforced by favorable financial conditions (booming equity markets, lower long-term borrowing costs, weak dollar).
- Intra-regional trade surge also supported export strength.
Country-level projections and key statistics
- China:
- Growth: 4.8 percent in 2025, slowing to 4.2 percent in 2026.
- Deflationary pressures persist; GDP deflator has been negative since 2023.
- China contributes one-third to global growth.
- Near-term fiscal support has been sizable; industrial policy fiscal support estimated at about 4 percent every year.
- IMF estimate to rehabilitate the whole real estate sector: about 5 percent of GDP, possibly over three years.
- Medium-term risk: without pivot to consumption, China could slow to 3.5 percent over the medium term.
- Japan:
- Growth revised to 1.1 percent in 2025, projected to slow to 0.6 percent in 2026 (closer to potential).
- Inflation projected to converge to the BOJ's 2 percent target in 2027, helped by a decline in commodity prices.
- India:
- Growth: 6.6 percent in 2025, projected to moderate to 6.2 percent in 2026 (forecast predicated on tariffs remaining at 50 percent).
- India’s 50 percent tariff cited as the highest globally; sectors affected include garments, leather, gems and jewelry (labor-intensive sectors).
- First-quarter outturn at 7.8 percent cited as a strong tailwind.
- Korea:
- Growth: 0.9 percent in 2025, increasing to 1.8 percent in 2026.
- Government debt ratio to GDP around 50 percent; judged as low versus many advanced economies with short-term fiscal space but long-term demographic pressures.
- ASEAN:
- Expansion projected at 4.3 percent for two straight years, supported by strong export strength and in some countries policy support.
- Sri Lanka:
- Recent rebound after crisis: 5 percent growth last year; estimated 4.2 percent this year and next, moving toward potential of 3 percent.
- IMF advice: continue program implementation, fiscal consolidation, ensure viability of state-owned enterprises and public investment management.
- Bangladesh:
- IMF lowered FY26 growth projection to 4.9 percent (from 5.4 percent earlier); end‑FY26 inflation revised to 8.5 percent (World Economic Outlook figure referenced as 8.7 percent in a question).
- Reasons cited for lower growth: tighter policy mix, tariffs and uncertainty, upcoming elections, and weakness in the financial sector.
- Program review priorities: revenue mobilization and financial sector reforms.
Risks and channels of transmission
- Key downside risks:
- Escalation of tariffs and trade uncertainty (tariffs could still increase).
- Geopolitical tensions raising risk premia and interest rates.
- Tightening of financial conditions amplifying debt-related vulnerabilities.
- Asia particularly exposed due to high integration in global supply chains; shocks between large economies (U.S. and China) have amplified regional impact.
- Rare earth export controls and renewed U.S.-China tensions flagged as potential supply‑chain and risk amplifiers.
Policy recommendations (regional and country-level)
- Monetary and fiscal stance:
- Where inflation is expected to fall below target, countries can lower interest rates.
- Deploy temporary, well-targeted fiscal measures to support vulnerable people and viable firms in sectors hit by higher tariffs.
- Upgrade medium-term fiscal frameworks to prepare for future shocks and manage long-term spending pressures.
- Growth, inclusiveness, and rebalancing:
- Rebalance toward domestic demand, especially consumption, through stronger social safety nets and, where needed, balance sheet repair.
- Pursue structural reforms to boost productivity and inclusion (labor market flexibility, business environment improvements).
- Trade and financial integration:
- Deeper regional integration to yield sizable gains: cut non-tariff barriers, broaden and modernize trade agreements (services and digital trade), ease FDI restrictions.
- Boost capital efficiency: deepen bond and equity markets, broaden market-based finance, strengthen insolvency and debt-workout frameworks so capital flows to most productive firms.
- Streamline regulations to unleash private-sector potential.
- China-specific:
- Fix the real estate sector via comprehensive policies (resolve unfinished/pre-sold housing; allow non-viable developers to exit; ensure funding for completion).
- Shift fiscal composition away from mainly industrial policy toward measures that boost consumption and social safety nets.
- Korea-specific:
- Use short-term fiscal space prudently and implement pension and healthcare reforms and medium-term fiscal frameworks to manage aging-related pressures.
- Sri Lanka-specific:
- Stay the course on program reforms; maintain cost-recovery energy pricing as a continuous structural benchmark under the program.
Structural challenges and reform priorities
- Structural headwinds for Asia this decade versus last:
- Aging populations, weaker productivity, pandemic scars, rising youth unemployment, and dissatisfaction over jobs and opportunities.
- Reform priorities to lift medium-term potential:
- Boost services sector (noted for China).
- Improve public investment management and governance (Sri Lanka emphasis).
- Liberalize trade, improve business environment, and make labor laws more flexible where needed (India emphasis).
- Promote deeper intraregional trade and financial integration (including digital payments and QR-code cross-border initiatives).
Events and publications
- Press briefing date: October 16, 2025.
- Asia and Pacific Regional Economic Outlook to be launched in Hong Kong on October 24 (press conference at 10 a.m. Hong Kong time).
Transcript of IMF press briefing, Asia and Pacific Department, Annual Meetings 2025.