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Press Briefing Transcript: Asia-Pacific Department, Spring Meetings 2026
April 16, 2026
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IMF Communications Department
MEDIA RELATIONS
PRESS OFFICER: Randa Elnagar
Phone: +1 202 623-7100Email: MEDIA@IMF.org
April 16, 2026
PRESS OFFICER: Randa Elnagar
Phone: +1 202 623-7100Email: MEDIA@IMF.org
Speakers:
Krishna Srinivasan, Director of the Asia and Pacific Department, IMF
Thomas Helbling, Deputy Director, Asia and Pacific Department, IMF
Moderator:
Randa Elnagar, Senior Communications Officer, IMF
MS. ELNAGAR: Good morning, and welcome to our attendees here in the room. And good evening to those joining us virtually and online from Asia. This is the Press Briefing on the Regional Outlook for Asia and the Pacific.
I am Randa Elnagar from the IMF's Communications Department. Joining me today is Krishna Srinivasan, Director of the Asia and Pacific Department, and Thomas Helbling, Deputy Director of the IMF's Asia and Pacific Department.
To kick-start our briefing, Krishna will give some opening remarks, and then we're going to take your questions. Krishna, the floor is yours. Thank you.
MR. SRINIVASAN: Thank you, Randa. Good morning to participants here in Washington, and a very good evening to those joining online from Asia. Welcome to our press briefing on Asia and the Pacific. Allow me to make a few opening remarks before I take your questions.
Asia entered 2026 on a solid footing with growth remaining resilient despite the region bearing the brunt of U.S. tariffs and heightened uncertainty. However, given the region's high fossil fuel intensity and reliance on the conflict areas for key commodities, the new energy shock will have a negative impact on the region. The shock is raising inflation, weakening external balances, tightening financial conditions, and narrowing policy space.
Let me elaborate on these. First, let's take a look at Asia's resilience. If you look at the chart here, growth across most Asian economies turned out stronger than expected in late 2025. This is in large part thanks to exports and consumption, which held up better than anticipated, supported by accommodative policies and financial conditions.
With regard to exports, much of the recent strength has been driven by robust demand for tech goods. If you can see on the chart on the left, this has benefited many Asian economies that are deeply integrated into tech supply chains.
In addition, trade diversification toward the rest of the world also helped cushion softer import demand from the U.S., especially for non-tech exports. And you can see that on the right-hand side chart. So Asia's exports to the U.S. declined, but that to the rest of the world increased.
As for other growth drivers which are not shown here, consumption recovered at different speeds across countries, while investment, not surprisingly, given the uncertainty, remained soft in many economies, amid uncertainty and country-specific shocks.
Let me now turn to the immediate challenge. In the context of the war in the Middle East, all oil and gas prices have risen sharply, and there's considerable uncertainty about how persistent the shock will be.
Asia is significantly exposed to the energy shock. This is because of three key reasons.
First, the region is highly energy-intensive, and you can see that in the chart on the left-hand side. The use of oil and gas amounts to about 4 percent of GDP for the region as a whole, although there is variation across countries. Now, this 4 percent, which I talked about, is nearly double Europe's share, and there's a lot of heterogeneity. For example, oil and gas use exceeds 10 percent in Malaysia and Thailand, but it's only 2 percent in Australia and New Zealand.
Second, limited domestic production means that this high energy intensity translates into import dependence. Altogether, net oil and gas imports amount to about 2.5 percent of GDP for the region, rising to about 8 percent for some economies such as Singapore and Thailand.
And third, we don't show that here the region is also exposed through non-energy inputs. Disruptions of fertilizers and petrochemical inputs, such as helium and sulfur, can create broader supply chain pressures if the conflict persists.
Now, turning to the forecast, the negative impact of energy shock has been offset to a considerable extent by the tailwinds that already put the region on a solid footing. Hence, under our reference scenario, which assumes a conflict of limited scope and duration, growth forecasts for Asia are broadly unchanged relative to our forecasts in January, and Asia remains the main driver of global growth.
Regional growth is projected to moderate from 5 percent in 2025 to 4.4 percent in 2026 and 4.2 percent in 2027. Advanced Asia is expected to slow as domestic demand stays soft. Emerging Asia remains a main growth engine, but the momentum is set to moderate with broad-based decelerations in China, India, and the ASEAN. As higher energy prices weigh on consumption and external positions, the composition of the outlook is also less favorable. Inflation is projected to rise from 1.4 percent in 2025 to 2.6 percent in 2026 and to ease 2.4 percent in 2027. External balances are weaker, policy space is narrower, and more importantly, risks are now firmly to the downside.
First, what are these risks? First, a larger or more persistent energy shock would hit Asia-Pacific countries unevenly. Second, economies that depend heavily on imported energy use are especially vulnerable. Third, risks are greater still where energy buffers and fiscal space are limited or where remittances, tourism, or fertilizer imports add to the exposure. This matters in parts of South Asia, Southeast Asia, and key among the Pacific Island countries.
To better quantify risks, the WEO includes two adverse scenarios. Two other scenarios under the adverse scenario, the increase in energy prices is larger and more persistent, with oil prices rising to about 60 percent above the January forecast in 2026 and remaining 20 percent higher in 2027. This leads to a cumulative output loss of about 0.8 percent by 2027 for the major Asian economies and to higher inflation. In the most severe scenario, the shock becomes more persistent and damaging. The economic drag worsens due to second-round effects, with cumulative output losses of almost 2 percent by 2027. Energy-exposed economies, especially in some South and Southeast Asia economies will be hit the hardest.
Turning to policies, the near-term priority is to absorb the shock while preserving space and price signals, starting with monetary policy. So far, inflation expectations remain broadly anchored in 2027. You can see that in the chart on the right-hand side, 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.
Let me provide a few country examples. In Japan, where inflation is expected to rise above the target from below, the central bank can look through the first round of energy shock and continue withdrawing accommodation. By contrast, the scope to look through the shock is more limited in economies where inflation is already above target and pressures remain firm, such as in Australia. In economies where inflation remains below target, such as Thailand and the Philippines, further rate cuts can be paused to preserve room for easing later.
Finally, it's important in this context to allow flexible exchange rates to facilitate macroeconomic adjustment and be guided by the IMF's Integrated Policy Framework, should movements become excessive or disorderly.
What about fiscal policy? Fiscal policy requires a careful balancing act. Prudence matters more than the past, as interest costs are rising, debt levels are higher, and fiscal space is narrower, as seen in the chart on the left-hand side. This means that where needed, fiscal support should be temporary, with sunset clauses targeted to vulnerable households and viable firms. While designed to preserve fiscal price signals in places where the fiscal space is limited and inflation risks are elevated, support should be budget neutral, meaning policymakers should find offsetting savings elsewhere in the budget or implement new revenue measures. In that respect, it is vital to ensure coherence between monetary and fiscal policies.
Let me note that broad fuel subsidies, tax cuts, and general price caps may smoothen inflation in the short run, but they are costly, distortionary, often regressive, and very hard to unwind. In fact, as shown on the right chart, higher energy prices can quickly trigger new support measures and make existing subsidies more expensive, as in 2022.
I'll close with a broader message. This shock strengthens the case for structural reform. It does not weaken it. Let me first lay out the issues.
In many economies, despite high growth and strong investment in education. Youth unemployment remains extremely elevated. As the chart on the left-hand side shows, highly educated young workers are struggling to find positions that match their qualifications. This points to persistent skill mismatches and a weak connection between education systems and labor market needs.
Then there is AI that has the potential to deliver sizable gains in growth and productivity across Asia. But if adoption moves faster than skills adjust, as shown in the right-hand side chart, it could worsen these mismatches and make labor market pressures that much more acute, especially for young workers.
This strengthens the case for rethinking education and reskilling more broadly, making universities and technical programs more responsive to employer demand and equipping graduates with skills that firms actually need.
What other reforms are needed to increase resilience? We have been calling across Asia for stronger social safety nets that would make it easier to protect vulnerable households without relying on generalized subsidies, stronger domestic final demand, and deeper regional integration that would reduce dependence on external demand and improve resilience to external shocks. And last but not least, investment in alternative energy sources, energy efficiency, and power grids, and that would reduce vulnerability to future fuel import shocks.
So the near-term task is to absorb the shocks while preserving price signals and policy credibility. The medium-term task is to build a more resilient, more balanced, and more inclusive growth model.
With that, let me thank you. I look forward to your questions. Thomas and I will be answering your questions.
MS. ELNAGAR: Thank you very much, Krishna. We're going to take your questions, so please, before you start, identify yourself and your news organization. We're going to be grouping your questions, so please, we're going to start with regional questions, so give me your questions one at a time. Thank you. The lady in the front row.
QUESTIONER: Thank you. So my question focuses on China. So, how does the IMF assess the current growth momentum in China, especially between the domestic demand recovery and external headwinds? And also, what role can China play in supporting economic developments globally? Thank you.
MR. SRINIVASAN: Thank you for the question. So you can see from our growth forecast for China, we have lowered our growth forecast from, you know, it was 5 percent in 2025. It's now 4.4 percent, modestly reduced from our January forecast, and it slows further in 2027. Now momentum in China has been helped by a number of factors, including because tariffs have come down compared to what we had earlier, and there is strong momentum going coming starting from 2025 onwards. That's been offset by the energy shock, which we've taken into account. But as you can see today, the numbers came out for the first quarter, and they were stronger than we had. We had internalized our projections and also stronger than consensus. So there is some upside potential to growth for in China going forward. And we look at the numbers again in the context of our forecast in July.
That said, if you look at the numbers, China still relies a lot on, on exports. Production is stronger, exports are stronger, and domestic demand remains weak. So our fundamental policy advice with China of rebalancing the economy towards greater consumption, that stays notwithstanding the momentum. The fact is that China cannot rely on export-led growth going forward. It's quite a big economy, and so it needs to rebalance, and that remains, that policy advice, which will be articulated in our substantive Staff Report, remains. Do you want to add something?
MS. ELNAGAR: I'll go to the lady next to her now. And if we can focus on regional, please go back to China.
QUESTIONER: Thank you, Randa. My first question is about energy shock. You mentioned that a lot of the Asian economies are exposed to energy shocks, and they rely heavily on imports. So, what are the IMF suggestions for those countries specifically when they have to import a lot of energy, and they are more vulnerable? Secondly, about trade, because right now the war is going on, and it's likely to disrupt trade as well. And Asia is very integrated in the global supply chain. Do you think this kind of disruptions would facilitate regional integration within the Asian region? Thank you.
MR. SRINIVASAN: Thank you for the question. As I showed in my chart, this is a region which relies a lot on -- it's very energy-intensive. And so, if you look at energy intensity for the region as a whole, it's 4 percent of GDP. The numbers do matter. For some countries, it's even higher, 8 to 10 percent. And because domestic production of energy is much on the lower side, they import a lot. So they are much more vulnerable to the energy shock than many other regions. So that's clearly an issue that they’re grappling with.
And what does it mean for policies? We've talked about that. In the case of monetary policy, most countries should wait to, you know, tighten further. They have the room to look through the shock. Assuming in our reference scenario, we assume that the shock is of limited duration. So they have the room right now to look through the shock, right? But if, suppose, the shock intensifies or the duration increases, then they'll have to adjust monetary policy accordingly.
On fiscal policy, we are very clear: let price signals work. Because if you don't let price signals work, you're not going to let demand and supply match in the context of supply shortages. And that's going to be inimical for prospects around the world. So we are talking about targeted fiscal support targeted to vulnerable people and viable firms. And that's important to preserve the buffers. All countries have been hit by repeated shocks, so buffers have gone down. So you want to preserve your buffers. So that's why we emphasize on the need to provide targeted support. Support which is temporary, so have sunset clauses. So that's the thing.
In terms of your second question, we've talked about this in the past, right? Integration within Asia is limited because many countries in Asia use non-tariff barriers. Now, this could be a wake-up call. This could be a way for countries in Asia to trade more with each other, reduce non-tariff barriers, and increase trade integration. So this is something which we've been calling for in the past. And this shock, in some sense, also kind of underscores the need to diversify your trading partners and so on. And so greater integration is something which we would call for.
MS. ELNAGAR: Thank you. Any further regional questions? Okay. The lady in pink.
QUESTIONER: Thank you, Randa. You've given from a broader perspective, the regional outlook seems a bit weakening, is what you have said on the growth aspect. I want to specifically ask what is the road ahead for small states in the region and what kind of policy support do you think they'll need?
I also have a quick follow-up question, which is on India. You've given a slightly optimistic estimate for India's growth when it comes to 2026 and 2027. A couple of changes in the country when calculating their GDP, the base year has been changed, and now if things get -- if the situation gets worse, then they will have to take further brunt off the fuel prices and pass it on to consumers. Do you think they'll have the appetite to bear this?
MR. SRINIVASAN: So when you talked about small states. I wasn't sure you're talking about small states in South Asia? Are you talking about the Pacific islands?
QUESTIONER: Yeah.
MR. SRINIVASAN: So we are very concerned about the small states in the Pacific Islands because these countries’ cost of living has been an issue even before the shock. They're highly dependent on imports of oil, gas, and so on, so forth. But it's diesel, kerosene, and so on. So we are very concerned. And also, what's important to note is that even if things become more novel in terms of disruptions come down by the time the ships go from the Middle East to the Pacific Islands, it's a long time. So we are very concerned about these countries, and they have more limited buffers. So that's something which we need to take into account. And, you know, we are here to provide any kind of support that they need, whether it's policy support or financial assistance, and so on.
In terms of India, you know, we have modestly increased our forecast by 0.1 percentage point. And that partly reflects the fact that momentum coming into 2026 was strong. And also, you know, tariffs were lowered from 50 to 10 percent. So that gives a fillip to the economy activity in addition to the tax reforms, which they've done last year. So, of course, the question is if this shock intensifies both in terms of duration and expands beyond just oil and gas, that could be disruptive for India. So far, you know, they've been very prudent on their fiscal. They have built buffers over the years, and they've been able to provide support. But if this intensifies, it'll get worse for all countries, including for India. So that's something which you have to watch out for.
MS. ELNAGAR: Okay, we'll go to this side of the room. The gentleman in the second row.
QUESTIONER: Thank you, Krishna. Given that nearly half of India's remittances come from the Gulf region, how significant could a potential $5 to $10 billion decline for India's external accounts due to the conflict? How might similar remittance dependencies affect other South Asian countries like Bangladesh and Nepal?
The second question is what policy measures can India adopt to cushion the effects of prolonged volatility in global commodity markets? How vulnerable are South Asian economies to extended disruptions in global trade and supply chains? Thank you.
MR. SRINIVASAN: Thank you. On your question on remittances, so far, what you've seen is remittances have held pretty strong, pretty robust. And you can see that that's reflecting the fact that people have not from India and other Asian countries have not left the Middle East. So they're still there. So remittances have held up quite strongly. And one part of me tells me that, given infrastructure needs to be built back again in these countries, I think remittances are likely to stay strong. That's my gut feeling.
In terms of what they can do, what can countries do, I think they have to use their buffers very wisely. Countries like India have been very prudent on fiscal. They have accumulated buffers. But here too, they have to allow price signals to work and use their buffers in an efficient way because if this shock intensifies, they will need the buffers. So again, we have been emphasizing the principles in terms of providing targeted support, targeted to people who need it the most, targeted to firms which are viable and so on, so forth. Hold your, you know, keep your buffers in such a -- or expand your buffers in such a way that you give it to those who really need it.
MS. ELNAGAR: Thank you. The gentleman here. I'm going to stay on this side of the room.
QUESTIONER: Good morning. Given the war in the Middle East, how does the IMF plan to help countries like Nepal? Thank you.
MR. SRINIVASAN: I think Thomas will take that question.
MR. HELBLING: In general, the IMF stands ready to help all our member countries. In particular, of course, at this moment we focus on more vulnerable, lower-income countries that as usual, the IMF stands ready. We also stand ready to support countries through policy advice and consult as needed. We can quickly react. And in the case of Nepal, as you know, there was recently a Staff-Level Agreement on the Seventh Review. I believe that was concluded. The program will go to the Board, and then that will be the end of the program. And the IMF will continue the close collaboration with Nepal and support policymaking, both in terms of surveillance, but also through capacity development help any policy adjustment needed. Thank you.
MS. ELNAGAR: Thank you, Thomas. We're going to go on WebEx. I know that there's another Nepal question now, so if we can take it.
MR. HELBLING: Sure.
MR. QUESTIONER: Namaste. Good evening from Nepal. . There is a debate in Nepal about reviewing the pegging of its currency to the Indian rupees. Many economies in the world exercise the peg exchange rate system. My question is whether maintaining pegged exchange rate regime benefits small and vulnerable countries like Nepal, especially when tackling the major geopolitical and economic shocks, such as ongoing conflict in the Middle East. Should countries like Nepal consider alternatives to peg exchange rate? And may I ask another question as well?
MS. ELNAGAR: We can stay to one question, please, because we have a lot of questions and little time. Thank you.
MR. HELBLING: So, on your question, as Krishna mentioned, the general advice is to let the exchange rate be a shock absorber. But that's the general advice. It's for countries that typically have inflation targeting regimes and some exchange rate flexibility. So for Nepal, Nepal has a pegged exchange rate. The pegged exchange rate is system -- is the nominal anchor. And our general advice is for such systems, if they're well established, to keep them and reconsider the exchange rate in good times, not in times of vulnerabilities or stresses, or uncertainty, as in current times. I would also note that thanks to the IMF arrangement that Nepal has had, Nepal, with the reforms, has built some fiscal buffers. So the government has some scope along the lines that Krishna mentioned, with targeted and limited measures to help the population and the country to absorb the shock. Thank you.
MS. ELNAGAR: We go back to the room, please. The lady on the right.
QUESTIONER: Given Asian countries are under severe strain from the Middle East conflict, have any countries in the region asked for IMF help already? And if so, can you identify? Thank you.
MR. SRINIVASAN: So, as mentioned, we are here to provide support, and we have programs in four countries. We're talking to those in terms of their needs. In terms of new programs,as of now, we have not heard anything from countries. But as I said, you know, we are here to help. And you know, it's not just about financial assistance. It's also about policy advice. So for a lot of countries, we're engaging very intensively in terms of providing advice, what they should be doing on policies.
MS. ELNAGAR: We go to the left. I didn't take anyone there. So the lady, please.
QUESTIONER: Hello, good morning. So I have questions for the Philippines. So you cut your projection for to 4.1 percent from 5.6 percent in January, but you kept it at 5.8 percent for 2027. I'm wondering if this tells us that the economic drags from this crisis would be just for the short-term for our country, and what are the growth drivers behind the rebound that you're expecting for next year? And maybe just another quick point. As a country that's already grappling with a budget deficit and where domestic headwinds have already slowed our fiscal consolidation even before this war erupted, how can the government ensure that their fiscal response to this crisis will not further erode the economy? And can they afford sustaining their fuel subsidies and possibly suspending their excise tax on fuel until this conflict ends? Thank you.
MR. SRINIVASAN: So there were lots of questions in one question. So I might not remember all the questions, but let me try it. So this was in Philippines, right? On Philippines, we have lowered our growth forecasts. The momentum coming into 2026 was weaker. And this reflects the fact that the country is still -- sentiment is still weak, given the governance issues with these flood control projects, the public flood control project. So that was already weighing on sentiment across investors, and then comes the shock. And as I can, you can see on the chart I showed, Philippines is a very energy-intensive economy. It relies a lot on imports. So the shock has a lot -- significant bearing on prospects in Philippines.
The question about policy advice. See, many countries we've seen over the last two decades, we've seen multiple shocks. So over the years, countries have lost buffers. And so they have to be that much more cognizant of the fact that buffers are lower. And so, when we talk about providing support, we keep harping on the point about targeted support. Why do we say that? Because buffers have come down, and we don't know how long this shock will last. So providing targeted support is very important, and that applies in the case of Philippines. Debt levels aren't very low; it's still at about 60 percent. So there's not much by way of fiscal buffers. So, use your buffers in a very efficient way. And that's what is important for the Philippines and for other countries in the region, especially those which rely a lot on imports, don't have much by way of physical buffers of oil and gas.
MS. ELNAGAR: Thank you, Krishna. I will read a couple of questions on ASEAN since we are on topic now.
MR. SRINIVASAN: Yeah.
MS. ELNAGAR: We received questions from the Nation, Thai Publica, and TV3 about debts. What would a smart, sustainable, and effective means manage fiscal policy by authorities look like while monetary policy is managed by BOT (Bank of Thailand)? There is another question on ASEAN. Looking at ASEAN's public debt, is Thailand's position the most fragile? Has the region's public debt position deteriorated? And what advice do you have to Thailand and ASEAN to handle rising debts while maintaining growth?
MR. SRINIVASAN: Thank you for the question. On the issue of Thailand, the question was about debt, whether Thailand stands out. I think debt levels in Thailand are slightly below 70, at about 65 to 66 percent. And that's not very different to what we see in Malaysia and the Philippines. So Thailand, yes, the debt is on the higher side, but it's not among the weakest in terms of the levels of debt. But this also puts the onus on making sure that you use your fiscal resources wisely. And so, the principles we talked about applies for Thailand as much as they apply for other countries we talked about.
In the case of a broader case of ASEAN, there is a lot of heterogeneity in terms of how we see energy intensity in terms of buffers and so on. But the broad principles of inflation, of monetary policy, looking through this shock, you know, waiting to move on monetary policy is important. At the same time, if the risk of inflation expectation is getting unanchored rise, then you have to be agile and tight to monetary policy. So at this point in time, they can wait to move on monetary policy. On fiscal policy, provided targeted support which is aimed at the poor and the vulnerable and viable firms. And that's important to make sure that you stay within your -- this is not the time to actually play around with fiscal frameworks and so on. So I would say that's an important point to make.
MS. ELNAGAR: Thank you. We'll go back to the room. I'll go to the lady in the back.
QUESTIONER: Hi, South Korea is one of the countries most severely affected by the blockade of Strait of Hormuz. How do you assess the scale of economic scar this shock may leave on Korean economy going forward? And do you view this is a one-time shock or do you believe this will have sustained increase in cost for business over the longer term due to the supply chain realignment needed?
MR. SRINIVASAN: Thomas?
MR. HELBLING: Sure. Thank you. On Korea, as for the vulnerability, I think we see Korea in line with ASEAN, Asia as a whole, it's energy importing region. Korea, we will point out, is in the fortunate situation that it starts from a strong macro condition. Growth has picked up; it has benefited from a tech cycle, and those benefits will carry into 2026 and 2027 in our current forecast. And we expect these benefits to remain in place. The government has been very proactive trying to mitigate the impact of the shock. It benefits that it has substantial energy buffers. It has been proactive in encouraging other sources of energy.
And then in terms of the shock itself, I think that's what Krishna mentioned earlier. There's considerable forecast uncertainty in our reference scenario. It's a relatively moderate, short-lived shock, mainly in the first half of the of the year, and then it will subside in the second half. But then we have adverse scenarios. As Krishna mentioned, the adverse scenario is just the oil price mostly higher throughout 2026, and in the severe scenario, the oil price will stay high into 2027. That clearly would change the picture in Korea and elsewhere in Asia. But our view is it's too early to tell how this oil shock will play out. In the severe case, it will be a bigger concern for the global economy and for the region, of course, but we will see.
MS. ELNAGAR: Thank you. Stay in the room. The gentleman in the middle.
QUESTIONER: Thank you, Randa. I had a quick question about the situation for countries such as Sri Lanka and Bangladesh, which has already in the quite difficult situation a few years back, -- are among those are most impacted by the energy crisis right now. I wanted to have your opinion about that and how concerned you are about this country. And that's it. Thank you.
MR. SRINIVASAN: Thank you. So again, both these countries have IMF-supported programs, and in the case of Sri Lanka, over the last three years, they have made significant improvement in boosting their tax revenues, revenues as a share of GDP. So they have gradually built up fiscal buffers. So in some sense, I would say they're better placed to provide support to people who are hurting from this energy shock. But again, the principles apply to them even more than to other countries. Make it very targeted and temporary in such a way that, you know, you use whatever buffers you have in a very efficient way.
In the case of Bangladesh, their revenue base is on the lower side, their revenue intake is on the lower side, and so they are that much more hard-pressed to provide support. But again, people are hurting in Bangladesh, so it's even more important to use whatever resources you have to make it as targeted as possible. I think at the same time, they need to really work towards improving their revenue intake, which is among the lowest in the world. And they also need to take into account other impediments in the financial sector and so on, so that they can get growth going over the near term and over the longer term.
MS. ELNAGAR: Thank you. We have other questions on Sri Lanka online, and then we go back to the room. So we're going to go on WebEx now.
QUESTIONER: Hi, my question on Sri Lanka is although Sri Lanka's sovereign debt restructuring is nearing completion, the country remains one of the most highly indebted economies in the region. Now, earlier, the IMF also warned that any fiscal slippages could trigger a repeat in the crisis despite good bond spreads and accumulating reserves. Given what is happening in the Middle East, what is the position of the IMF when it comes to Sri Lanka's recovery in terms of protecting the poor and vulnerable and adding further support? Thank you.
MR. SRINIVASAN: Thanks for the question. Like many other countries in Asia, Sri Lanka also relies a lot on import of energy, when it was oil and gas. So they are as vulnerable as other countries in the region. The point I was making in response to the previous question was that over the last three years, they have slowly built up buffers on the fiscal side. Their revenue as a share of GDP has doubled from the bottom of the crisis to where we are today. So they are in a better position than they were before to provide targeted fiscal support. At the same time, it's important that they continue on the reforms which have embarked upon so that they can secure inclusive and balance and strong growth going forward.
MS. ELNAGAR: Thank you. We're going to take one from the room and then go back online. The gentleman on the left.
QUESTIONER: Thank you. Last year, the IMF called on China to strengthen on its currency. So you called on China to allow its currency to strengthen and rely more on domestic consumer spending. So in the meantime, since then, what's the IMF's assessment of China's foreign exchange management, and do you see any shift in the works? And relatedly, just another point, the renminbi is among the strongest performing currencies amongst the major currencies since the Iran war began. Do you see a future where more oil, for example, is priced in yuan? Thank you.
MR. HELBLING: Okay. I think fundamentally our advice still stands. Let me point out that our advice is for China to allow for more exchange rate flexibility. For the exchange rate to, on the one hand, act as a shock absorber, on the other hand, also allow for better and more monetary policy transmission. So we advise for more exchange rate flexibility in the context of a policy to rebalancing the economy and strengthen domestic demand. And as you know, we still see room for more forceful and comprehensive policies to strengthen domestic demand, as pointed out in the last Article IV.
As for the renminbi, it is the, you know, the authorities have allowed renminbi to strengthen in line with market forces. And I think that reflects fundamentals. China has had an increasing trade surplus. I think some of the capital outflow pressures with the strong trade performance have eased. So the fact that the renminbi has strengthened is in line with expectations as for the pricing of contracts, and that's up to the market, and we have no comment on that. Thank you.
MS. ELNAGAR: Thank you very much. We're going to go back online with WebEx now, please. I know we have a question on Japan.
MS. ELNAGAR: Yes, go ahead.
QUESTIONER: Hello, I have a question about the Bank of Japan. Now, crude oil prices make inflation higher, but at the same time there is a risk of slowing economic growth. When the BOJ conducts monetary policy, what factors should they keep in mind? Thank you.
MR. SRINIVASAN: Thanks for the question. So in terms of the BOJ's action, what we're seeing, what we're forecasting is that growth has held up quite well in Japan. We have growth in Japan at, you know, 1.2 percent in 2025. It's still at what we project at 0.7 percent in 2027. That's around the potential growth rate in Japan in terms of the BOJ's action. You know, we expect inflation to rise, to increase temporarily and come back to target by 2027. So our advice and, and our advice to BOJ is to, you know, along the lines of what we've been talking about, which is to be data dependent and gradually start increasing rates going forward. Activity is holding up quite well. Domestic demand is quite strong. We see real wage growth being positive. The Shunto negotiations have been pretty robust. So, we expect domestic demand to be strong. And that is reflected in our growth forecast at 0.7 percent in 2026 and around the same amount in 2027. Growth is holding up quite well. And so that's where we are in terms of our advice on monetary policy.
MS. ELNAGAR: Thank you. We'll stay on Japan. I have a question online. They are asking to elaborate on the Japan's growth projections from the WEO and balance between fiscal prudence and expansionary policies in Japan.
MR. SRINIVASAN: So, you know, I'm just going to repeat myself in terms of answering that question. Growth was pretty strong in 2025 at 1.2 percent. We expect at 0.7 percent this year and 0.6 percent next year. You know, domestic demand remains strong, pretty strong. You know, like I said, real wage growth is positive. The Shunto negotiations are providing further fill up to domestic demand. So that's coming along well in terms of fiscal. Our advice is similar to what we've been telling other countries in Asia, which is to provide targeted support and use your buffers wisely. I mean, compared to other countries in the region, I would say Japan, China, and Korea have physical buffers of, of energy, which others don't. So Japan is better placed. That said, you have to use your buffers wisely, and that's consumed our fiscal policy advice to countries in the region.
MS. ELNAGAR: Thank you. We have three minutes left, so we're going to go back to our colleagues online. Okay, we go online, and then we come back to the room. Okay, please go ahead. Okay, while they're connecting, we're going to go to the room.
QUESTIONER: Hello. Can you --
MS. ELNAGAR: Oh, he's here.
QUESTIONER: Hi, I was actually asking two questions. One is how do you assess the current economic situation of Bangladesh, especially the reform under the IMF program, especially within the banking system, and the revenue generation, as you are talking about the revenue generation earlier? And the second question will be considering the energy crisis right now going on in Bangladesh, do you have any additional financing packages that you can offer to Bangladesh to deal with kind of situation, especially as a budget support? Thank you.
MR. SRINIVASAN: So, like other countries in Asia, Bangladesh is also affected by the energy shock. They import a lot of energy, so they're affected by the shock. You know, are we working with the authorities in terms of policy support and on the programs, and negotiations are ongoing, discussions are ongoing. So we'll have to just wait and see how those things pan out.
MS. ELNAGAR: Thank you. We have one more question to go, please. We're going to go to the last question in the room.
QUESTIONER: Thank you so much.
MS. ELNAGAR: Please identify yourself.
QUESTIONER: Good morning. [I am from Bangladesh. So thank you very much for the chance. Krishna, you visited three weeks back, Bangladesh, and met our Prime Minister and Finance Minister, all the ministers down the line. So what is your impression regarding the new government and their fiscal management, fiscal space, because you know, our revenue is very poor. So what is your assessment regarding that?
And another issue, some installment is due. So, what is your position when you are going to release the installment? And another question, IMF MD, last day here in the briefing, Kristalina, she said that a country like Bangladesh and the developing countries, they should not waste time and start negotiation if they need additional finance. Thank you so much.
MR. SRINIVASAN: Thank you. So you're right, I did go to Bangladesh. I met with the Prime Minister, and met with the Finance Minister, and so on. And we had a good discussion in terms of the challenges the country faces, and you know, made the point that a new government with a significant majority, this is the right time to undertake ambitious reforms. And so they heard us, and now we'll wait to see how they react to that.
I would say that in terms of revenue intake, Bangladesh has not done well. It's on the lower side, and it has actually revenue intake has slipped over the last three years. So a lot of reforms are needed in Bangladesh, both on the fiscal side, on the revenue side, and trying to rehabilitate the financial sector and on the exchange rate reform. So the three pillars on which the program was based, all of those, there's work to be done. Work to be done.
In terms of your last question, the team is negotiating -- is having continuous discussions with the authorities, and we'll have an update for you down the road.
MS. ELNAGAR: I know I promised the last question, but my colleagues online are asking me because of the time difference in New Zealand; our colleagues are asking about the effect of the oil imports, specifically energy imports, on Pacific islands and how they could navigate the crisis.
MR. SRINIVASAN: So Thomas, you can take it. Take it.
MR. HELBLING: I think on the Pacific Island countries, the concerns are broadly similar to that of the region. There's a specific element. Of course, they're smaller, they're further away. So, besides our general recommendation of using buffers wisely, we would also encourage the countries to be proactive and think of supply chains, procuring oils and other essential supplies on a more forward-looking basis, working with partner countries, and also then, depending on the situation in individual countries, use the policy buffers they have within their overall framework. Thank you.
MS. ELNAGAR: Thank you very much. Thanks to our speakers, Krishna and Thomas. And thanks to you for attending in-person and following online with the time difference.
We have reached the end of our Press Briefing today. We look forward to seeing you in our other regional briefings. The Africa Regional Outlook will follow us after this, and then you're going to find the transcript later online. Have a good day. Thank you so much.
