{
  "title": "Asia’s New Growth Challenge",
  "sourceUrl": "https://www.imf.org/en/publications/fandd/issues/2026/09/asias-new-growth-challenge-krishna-srinivasan",
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  "summary": "As societies age and trade fragments, policymakers must adapt to sustain growth and support rising living standards",
  "sections": [
    {
      "heading": "Key dynamics and outlook",
      "content": "- Asia accounts for nearly 40 percent of output and two-thirds of growth—up from a quarter in the 1990s.\n- Asia now accounts for roughly a third of global trade and is increasingly a hub for innovation, services, and finance.\n- A shrinking population is expected to subtract about 0.3 percentage point from growth annually by 2050.\n- Productivity gains from AI and related technologies could add 0.2 to 1 percentage point to growth.\n- Additional gains from trade integration could lift growth further by about 0.1 to 0.3 percentage point.\n- Together, these forces suggest growth in Asia could remain close to or even exceed recent historical averages if productivity gains are fully realized."
    },
    {
      "heading": "Productivity, investment, and finance",
      "content": "- Finding: Productivity growth has slowed across much of Asia since the global financial crisis.\n- Finding: Investment remains high, but returns to capital have declined due to rising misallocation and diminishing efficiency.\n- Finding: Credit is abundant, but financial systems remain heavily bank-centric, favoring large incumbents (including state-owned enterprises) over younger, faster-growing, more innovative firms.\n- Policy priorities:\n  - Shift from more to better investment.\n  - Strengthen financial systems so capital flows to its most productive uses.\n  - Improve financial access, deepen capital markets, and expand venture finance.\n  - Price and allocate capital on market terms to boost innovation."
    },
    {
      "heading": "Demographics and labor supply",
      "content": "- Finding: Since the 1960s, fertility rates across Asia fell from about 6 children per woman to about 1.6 today; life expectancy rose from roughly 50 years to the mid-70s.\n- Finding: By 2050, one in five people in Asia will be 65 or older—double today’s share.\n- Regional divergence:\n  - Rapidly aging: Japan, Korea, China (shrinking workforces weighing on growth).\n  - Middle: India, Malaysia, Vietnam (demographic dividends fading).\n  - Younger: Nepal, the Philippines (labor forces still expanding).\n- Policy recommendations:\n  - Raise labor participation among women and older people.\n  - Invest in skills and facilitate labor mobility.\n  - Manage migration within and across borders.\n  - Leverage AI and other technologies to offset labor shortages in aging economies.\n  - Create enough high-quality jobs in younger economies to capture demographic dividends."
    },
    {
      "heading": "Trade fragmentation and regional integration",
      "content": "- Finding: Geoeconomic fragmentation is reshaping trade patterns, supply chains, and investment flows and raising uncertainty for export-oriented economies.\n- Finding: Less than 30 percent of final goods exports is traded within the region—about half the share in Europe and North America.\n- Finding: ASEAN (a group of 11 countries that would rank as the world’s fourth-largest economy) is highly open to global trade but intraregional trade accounts for less than a quarter of total trade.\n- Constraints to deeper intraregional trade: limited logistics infrastructure, uneven human capital development, and nontariff barriers.\n- Policy recommendations:\n  - Pursue more comprehensive, enforceable regional agreements covering services, digital trade, competition policy, and standards.\n  - Build fiscal space to manage transition costs, offset revenue losses from tariff reductions, and support complementary investments.\n  - Raise domestic tax revenue where low, notably in many ASEAN economies, to finance reforms and investments.\n- Quantified benefit: Deeper integration could raise regional real GDP by about 1.8 percent in the long run."
    },
    {
      "heading": "Technology, AI, and digitalization",
      "content": "- Finding: Asia leads in digital adoption, with about 90 percent of the population online, and accounts for more than two-thirds of global innovation in digital technologies.\n- Finding: AI could raise growth by up to 1 percentage point per year relative to a no-AI baseline in economies well placed to adopt it.\n- Distributional risks:\n  - Early adopters with higher-skilled workers and greater capital intensity stand to gain most.\n  - Later adoption in lower-income countries could widen regional disparities and raise financing costs if global investment demand increases.\n  - Within countries, AI may intensify wage and opportunity gaps, benefiting high-skilled workers while displacing others.\n- Policy priorities:\n  - Invest in education, digital infrastructure, and innovation.\n  - Implement labor policies for retraining and worker mobility.\n  - Use redistributive policies to share AI gains and support displaced workers.\n  - Build digital public infrastructure (identity, payment systems) and digital literacy.\n- Example: India’s digital payments move trillions of dollars each year and digitalizing tax and payment systems can raise government revenues while improving public spending efficiency."
    },
    {
      "heading": "Energy security and the transition",
      "content": "- Finding: Energy security has become a near-term macroeconomic challenge, notably in Southeast Asia where reliance on imported fossil fuels collides with rising energy demand.\n- Country responses cited:\n  - Vietnam: scaling up renewables to support manufacturing.\n  - Indonesia: exploring a shift away from coal.\n  - The Philippines: diversifying to depend less on imported energy.\n  - Thailand: making the energy transition a policy priority.\n- Trade-offs and opportunities:\n  - Falling renewables costs and advances in storage ease the transition even as digitalization and AI raise electricity demand.\n  - The challenge: move fast without compromising affordability or reliability.\n  - Payoff: greater energy security, less exposure to external shocks, and a new engine of resilient growth."
    },
    {
      "heading": "Policy synthesis: sustaining inclusive and resilient growth",
      "content": "- Core message: Policymakers must balance efficiency and resilience, innovation and inclusion, and address short-term pressures without sacrificing long-term prosperity.\n- Priority actions:\n  - Reorient growth toward productivity (not just capital accumulation).\n  - Strengthen skills, institutions, and technology adoption.\n  - Deepen regional integration in goods, services, and digital trade.\n  - Expand fiscal space and raise domestic revenues to finance reforms and investments.\n  - Promote targeted social and labor policies to manage distributional impacts of technology and demographic shifts.\n- Strategic outcome: If productivity gains (including AI) are fully realized and complemented by deeper trade integration and supportive policies, Asia can sustain or exceed recent historical growth despite demographic headwinds.\n\nSource: Asia’s New Growth Challenge, Finance & Development (September 2026), Krishna Srinivasan, IMF.\n\n---\n\n Content in this bundle\n\n- Asia’S New Growth Challenge\n  - Asia’S New Growth Challenge (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - Asia’S New Growth Challenge (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/fandd/issues/2026/09/asias-new-growth-challenge-krishna-srinivasan"
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    "Authors: KRISHNA SRINIVASAN",
    "Published: September 2, 2026",
    "Asia accounts for nearly 40 percent of output and two-thirds of growth—up from a quarter in the 1990s.",
    "Asia now accounts for roughly a third of global trade and is increasingly a hub for innovation, services, and finance.",
    "A shrinking population is expected to subtract about 0.3 percentage point from growth annually by 2050.",
    "Productivity gains from AI and related technologies could add 0.2 to 1 percentage point to growth.",
    "Additional gains from trade integration could lift growth further by about 0.1 to 0.3 percentage point.",
    "Together, these forces suggest growth in Asia could remain close to or even exceed recent historical averages if productivity gains are fully realized.",
    "Finding: Productivity growth has slowed across much of Asia since the global financial crisis.",
    "Finding: Investment remains high, but returns to capital have declined due to rising misallocation and diminishing efficiency.",
    "Finding: Credit is abundant, but financial systems remain heavily bank-centric, favoring large incumbents (including state-owned enterprises) over younger, faster-growing, more innovative firms.",
    "Policy priorities:",
    "Finding: Since the 1960s, fertility rates across Asia fell from about 6 children per woman to about 1.6 today; life expectancy rose from roughly 50 years to the mid-70s.",
    "Finding: By 2050, one in five people in Asia will be 65 or older—double today’s share.",
    "Regional divergence:",
    "Policy recommendations:",
    "Finding: Geoeconomic fragmentation is reshaping trade patterns, supply chains, and investment flows and raising uncertainty for export-oriented economies.",
    "Finding: Less than 30 percent of final goods exports is traded within the region—about half the share in Europe and North America.",
    "Finding: ASEAN (a group of 11 countries that would rank as the world’s fourth-largest economy) is highly open to global trade but intraregional trade accounts for less than a quarter of total trade.",
    "Constraints to deeper intraregional trade: limited logistics infrastructure, uneven human capital development, and nontariff barriers.",
    "Policy recommendations:",
    "Quantified benefit: Deeper integration could raise regional real GDP by about 1.8 percent in the long run.",
    "Finding: Asia leads in digital adoption, with about 90 percent of the population online, and accounts for more than two-thirds of global innovation in digital technologies.",
    "Finding: AI could raise growth by up to 1 percentage point per year relative to a no-AI baseline in economies well placed to adopt it.",
    "Distributional risks:",
    "Policy priorities:",
    "Example: India’s digital payments move trillions of dollars each year and digitalizing tax and payment systems can raise government revenues while improving public spending efficiency.",
    "Finding: Energy security has become a near-term macroeconomic challenge, notably in Southeast Asia where reliance on imported fossil fuels collides with rising energy demand.",
    "Country responses cited:",
    "Trade-offs and opportunities:",
    "Core message: Policymakers must balance efficiency and resilience, innovation and inclusion, and address short-term pressures without sacrificing long-term prosperity.",
    "Priority actions:",
    "Strategic outcome: If productivity gains (including AI) are fully realized and complemented by deeper trade integration and supportive policies, Asia can sustain or exceed recent historical growth despite demographic headwinds.",
    "**Asia’S New Growth Challenge**"
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