IMF raises Asian growth forecast

The International Monetary Fund (IMF) raised its forecast for Asian economic growth in October, despite the shock of the closure of the Strait of Hormuz. The IMF attributes this optimism largely to the boom in artificial intelligence, which has driven a surge in exports and investments across the region.

AI boom supports growth despite challenges

The IMF maintains its 2026 growth forecast for Asia at 3.1%, unchanged from its April 2026 estimate. This forecast appears largely unaffected by the war with Iran, even though the closure of the Strait of Hormuz has caused a loss of about 0.4 to 0.5 percentage points of GDP growth in the region.

Oil price stability hides conflicting trends

The closure of the Strait of Hormuz has been less disruptive than initially feared, due to several adjustments. These include increased oil supply from outside the Middle East, reduced demand in China, and the use of alternative transport routes. These factors helped keep the average price of crude oil at 85 dollars per barrel instead of the expected 110 dollars.

AI-driven exports boost growth in key economies

The surge in high-tech exports and AI-related investments has supported growth in developed and some emerging Asian countries. The United States and China together account for 57% of the world’s data centers built since 2024, highlighting the region’s role in AI manufacturing.

China’s growth is driven by trade, not AI

China’s economic performance is supported by trade surpluses in electric vehicles and renewable energy equipment, rather than AI. While AI investments contribute to growth, domestic demand remains stagnant. The country’s growth forecast for 2026 is within the lower range of government targets.

India and Indonesia benefit from different factors

India’s growth is driven by infrastructure and heavy industry, while Indonesia benefits from being a net exporter of energy. Both countries are expected to see strong growth in 2026, despite being net importers of AI-related products.

Asia leads in AI manufacturing and exports

Asia dominates global exports of AI-related products, with 80% of such exports coming from the region in 2025. Electronic integrated circuits, a key component of AI, are mostly exported by Asian countries, with South Korea, Taiwan, and China leading the way.

Data center investments are rising globally

The global expansion of data centers is expected to require 5 to 6 trillion dollars in investments by 2030. The United States leads in data center capacity, while China is second. However, constraints on electricity, space, and financial resources are shaping regional deployment strategies.

AI investments are growing rapidly in Asia

China is set to nearly triple its AI-related investments over three years, with significant government support. South Korea and Japan are also investing heavily in AI infrastructure, aiming to secure a leadership position in the technology race.

Risks of a slowdown in AI growth are increasing

Despite the current momentum, the IMF warns of potential slowdowns in AI-driven growth by 2027. Countries like Taiwan and Singapore may see significant reductions in growth rates, while India and Indonesia are expected to be less affected due to their less AI-dependent economies.

Resource constraints threaten AI expansion

High demand for electricity and water is straining infrastructure in many regions. In response, some countries are exploring innovative solutions, such as underwater data centers and desalination plants, to support the growing AI industry.

Financial markets show mixed reactions to AI investments

While Asian tech giants saw strong stock performance earlier in 2026, concerns about the profitability of AI investments have led to recent declines. However, stock valuations still suggest that the long-term growth of AI in Asia remains strong.

Future of AI growth remains uncertain

The war with Iran and rising oil prices could challenge Asia’s economic performance in 2027. While the region’s AI-driven growth is structural and rapid, the coming year may bring more uncertainty and volatility.