IMF Warns Middle East Energy Shocks Threaten Asian Growth

The International Monetary Fund lowered its global growth outlook during the Spring Meetings in Washington, citing instability in the Middle East and disruptions in the Strait of Hormuz. Chief Economist Pierre-Olivier Gourinchas detailed three scenarios, stating the world is currently drifting toward an adverse scenario where growth falls to 2.5%. In a severe case, growth could drop to 2.0%, risking a global recession. The Fund warned that energy supply shocks could push oil prices to $125 per barrel by 2027 and drive global inflation above 6%.

Asia remains the primary driver of global growth, though expansion is projected to moderate from 5% in 2025 to 4.2% by 2027. The region is particularly vulnerable due to high fossil fuel intensity and reliance on Middle East imports. The IMF slashed the Philippines' 2026 GDP growth forecast from 5.6% to 4.1%, following a national state of energy emergency declared by President Ferdinand R. Marcos, Jr. Thai Finance Minister Ekniti Nitithanprapas described the economic impact on Thailand as quite severe.

In contrast, India's economy remains resilient. The IMF modestly increased India's growth forecast by 0.1 percentage point, noting its expansion is more than twice the global average. While praising India's fiscal prudence, the Fund cautioned that high debt-to-GDP ratios and fuel subsidies remain risks. To mitigate regional instability, the IMF urged Asian central banks to remain agile and advised governments against broad fuel subsidies, recommending targeted support instead.