IMF Regional Economic Outlook 2025: India Leads Resilient Asia Amid Global Trade Headwinds
SDG 8: Decent Work and Economic Growth | SDG 9: Industry, Innovation, and Infrastructure | SDG 17: Partnerships for the Goals
Institutions: Ministry of Finance | Reserve Bank of India (RBI)
Growth Projections and Global Contribution
The International Monetary Fund (IMF), in its Regional Economic Outlook (REO) for Asia and Pacific (October 2025), projects that the region will continue to be the dominant engine of global expansion, contributing approximately 60% of global growth in both 2025 and 2026.
India’s Leadership: India is projected to be the fastest-growing major emerging economy, with its GDP forecast to expand by 6.6% in 2025 (FY26), a slight upward revision from the 6.5% recorded in the previous fiscal year. This strong performance is primarily supported by vigorous Q2 growth and the positive effects of structural reforms like GST 2.0. India’s growth is expected to moderate slightly to 6.2% in 2026.
Regional Outlook: Overall, Asia’s economy is projected to grow by 4.5% in 2025, showing unexpected resilience despite external challenges. China’s growth, however, is forecast to moderate to 4.8% in 2025, slowing further to 4.2% in 2026.
Inflation: Inflation is expected to remain soft in most emerging markets across Asia and move closer to central bank targets in 2026.
Resilience, Risks, and Structural Headwinds
The report notes that the region’s resilience is being tested by several compounding headwinds:
Trade Headwinds: The primary external risk is the intensifying shock from rising US tariffs and increasing protectionism, which is expected to reduce demand for Asian exports and eventually weigh on growth. This uncertainty has generally led to a downward revision of GDP forecasts for most Asian countries for 2025 and 2026.
Cushioning Factors: Asia has absorbed these shocks due to several temporary and structural factors, including a front-loading of exports ahead of new tariffs, stronger-than-expected investment in Artificial Intelligence (AI), and ongoing supply-chain reconfiguration within the region.
Structural Risks: Beyond trade, historical growth engines are weakening. Aging populations are diminishing the demographic dividend in major economies, and productivity growth is slowing because capital is not consistently reaching the most dynamic and productive firms.
Policy Imperatives for Durable Growth
The IMF urges policymakers to focus on ambitious structural reforms to secure durable, inclusive growth:
Rebalance Towards Domestic Demand: Policies should prioritize expanding the share of private consumption in the economy. Success relies on strengthening social safety nets to reduce the need for precautionary saving, thereby releasing private capital for consumption.
Deepen Financial Markets: Countries must implement reforms to accelerate capital efficiency. This involves fostering broader market-based finance, deepening stock and bond markets, and strengthening insolvency frameworks to ensure capital flows to the most productive enterprises.
Deepen Regional Integration: The report emphasizes that integrating the region further would yield sizable economic gains. This requires lowering non-tariff barriers, expanding trade agreements to cover services and digital trade, and easing restrictions on foreign direct investment. This is particularly critical for South Asia, where the services sector remains relatively closed.
What are Global Trade Headwinds?→ In this report, global trade headwinds refer to the growing negative effects on exports and demand stemming from increasing protectionism, most notably higher US tariffs and the policy uncertainty surrounding global trade agreements, which forces trade costs to rise and supply chains to reconfigure.
Follow the full report here: Regional Economic Outlook, Asia and Pacific Department, October 2025