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IMF Upgrades Asia's Growth Forecast, Warns of Risks from US-China Tension

IMF Director of the Asia and Pacific Department Krishna Srinivasan and IMF Deputy Director of the Asia and Pacific Department Thomas Helbling attend an Asia Pacific Department press briefing at the IMF/World Bank 2025 Annual Meetings in Washington, D.C., US, October 16, 2025. REUTERS/Elizabeth Frantz
IMF Director of the Asia and Pacific Department Krishna Srinivasan and IMF Deputy Director of the Asia and Pacific Department Thomas Helbling attend an Asia Pacific Department press briefing at the IMF/World Bank 2025 Annual Meetings in Washington, D.C., US, October 16, 2025. REUTERS/Elizabeth Frantz
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IMF Upgrades Asia's Growth Forecast, Warns of Risks from US-China Tension

IMF Director of the Asia and Pacific Department Krishna Srinivasan and IMF Deputy Director of the Asia and Pacific Department Thomas Helbling attend an Asia Pacific Department press briefing at the IMF/World Bank 2025 Annual Meetings in Washington, D.C., US, October 16, 2025. REUTERS/Elizabeth Frantz
IMF Director of the Asia and Pacific Department Krishna Srinivasan and IMF Deputy Director of the Asia and Pacific Department Thomas Helbling attend an Asia Pacific Department press briefing at the IMF/World Bank 2025 Annual Meetings in Washington, D.C., US, October 16, 2025. REUTERS/Elizabeth Frantz

The International Monetary Fund revised up Asia's economic growth forecast on Thursday, but warned that renewed escalation in US-China tensions could deal a heavy blow to a region heavily integrated in global supply chains.

Economic activity in the Asia-Pacific was holding up better than expected in April, despite the region bearing the brunt of US tariffs, said Krishna Srinivasan, director of the IMF's Asia and Pacific Department.

But he warned that there were significant downside risks to the region's outlook, as the "dust on tariffs has not settled yet" and could still increase.

"When risks to the world materialize, Asia will lose a lot more. This is a region which is highly integrated in global supply chains, so when there are tensions between large economies like the US and China, it will have a greater impact on Asia," he told a news conference.

Trade tensions between US and China have intensified after Beijing expanded its rare earth export controls, prompting a threat from US President Donald Trump to raise tariffs on Chinese goods by an additional 100% starting November 1.

The potential impact from the bilateral spat is not reflected in the IMF's latest projection for Asia's economy to expand 4.5% in 2025, slowing from 4.6% last year but up 0.6 percentage point from its estimate made in April. It projects growth to slow to 4.1% in 2026.

"The region is once again set to contribute the lion's share of global growth - about 60%, both this year and in 2026," Reuters quoted Srinivasan as saying.

Exports were supported by firms front-loading shipments ahead of the tariff hikes and a surge in intra-regional trade, he said. A technology boom driven by artificial intelligence also lifted exports, especially from South Korea and Japan.

Booming equity markets, lower long-term borrowing costs and a weak dollar have also helped, Srinivasan said, though warning that risks to the outlook were skewed to the downside.

Interest rates could rise again especially if trade policy uncertainty or geopolitical tensions intensify, while tightening financial conditions could increase the debt burden for some countries and stifle growth, Srinivasan said.

Concerted efforts to pursue reforms to boost trade and investment will help fuel durable growth for years to come, he added.

To mitigate the hit from external shocks, Asian countries can pivot their economies away from their reliance on exports toward greater domestic demand, Srinivasan said.

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IMF and Arab Monetary Fund Sign MoU to Enhance Cooperation

The MoU was signed by IMF Managing Director Dr. Kristalina Georgieva and AMF Director General Dr. Fahad Alturki - SPA
The MoU was signed by IMF Managing Director Dr. Kristalina Georgieva and AMF Director General Dr. Fahad Alturki - SPA
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IMF and Arab Monetary Fund Sign MoU to Enhance Cooperation

The MoU was signed by IMF Managing Director Dr. Kristalina Georgieva and AMF Director General Dr. Fahad Alturki - SPA
The MoU was signed by IMF Managing Director Dr. Kristalina Georgieva and AMF Director General Dr. Fahad Alturki - SPA

The International Monetary Fund (IMF) and the Arab Monetary Fund (AMF) signed a memorandum of understanding (MoU) on the sidelines of the AlUla Conference on Emerging Market Economies (EME) to enhance cooperation between the two institutions.

The MoU was signed by IMF Managing Director Dr. Kristalina Georgieva and AMF Director General Dr. Fahad Alturki, SPA reported.

The agreement aims to strengthen coordination in economic and financial policy areas, including surveillance and lending activities, data and analytical exchange, capacity building, and the provision of technical assistance, in support of regional financial and economic stability.

Both sides affirmed that the MoU represents an important step toward deepening their strategic partnership and strengthening the regional financial safety net, serving member countries and enhancing their ability to address economic challenges.

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Saudi Chambers Federation Announces First Saudi-Kuwaiti Business Council

File photo of the Saudi flag/AAWSAT
File photo of the Saudi flag/AAWSAT
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Saudi Chambers Federation Announces First Saudi-Kuwaiti Business Council

File photo of the Saudi flag/AAWSAT
File photo of the Saudi flag/AAWSAT

The Federation of Saudi Chambers announced the formation of the first joint Saudi-Kuwaiti Business Council for its inaugural term (1447–1451 AH) and the election of Salman bin Hassan Al-Oqayel as its chairman.

Al-Oqayel said the council’s formation marks a pivotal milestone in economic relations between Saudi Arabia and Kuwait, reflecting a practical approach to enabling the business sectors in both countries to capitalize on promising investment opportunities and strengthen bilateral trade and investment partnerships, SPA reported.

He noted that trade between Saudi Arabia and Kuwait reached approximately SAR9.5 billion by the end of November 2025, including SAR8 billion in Saudi exports and SAR1.5 billion in Kuwaiti imports.

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Leading Harvard Trade Economist Says Saudi Arabia Holds Key to Success in Fragmented Global Economy

Professor Pol Antràs speaks during a panel discussion at the AlUla Conference for Emerging Market Economies (Asharq Al-Awsat).
Professor Pol Antràs speaks during a panel discussion at the AlUla Conference for Emerging Market Economies (Asharq Al-Awsat).
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Leading Harvard Trade Economist Says Saudi Arabia Holds Key to Success in Fragmented Global Economy

Professor Pol Antràs speaks during a panel discussion at the AlUla Conference for Emerging Market Economies (Asharq Al-Awsat).
Professor Pol Antràs speaks during a panel discussion at the AlUla Conference for Emerging Market Economies (Asharq Al-Awsat).

Harvard University economics professor Pol Antràs said Saudi Arabia represents an exceptional model in the shifting global trade landscape, differing fundamentally from traditional emerging-market frameworks. He also stressed that globalization has not ended but has instead re-formed into what he describes as fragmented integration.

Speaking to Asharq Al-Awsat on the sidelines of the AlUla Conference for Emerging Market Economies, Antràs said Saudi Arabia’s Vision-driven structural reforms position the Kingdom to benefit from the ongoing phase of fragmented integration, adding that the country’s strategic focus on logistics transformation and artificial intelligence constitutes a key engine for sustainable growth that extends beyond the volatility of global crises.

Antràs, the Robert G. Ory Professor of Economics at Harvard University, is one of the leading contemporary theorists of international trade. His research, which reshaped understanding of global value chains, focuses on how firms organize cross-border production and how regulation and technological change influence global trade flows and corporate decision-making.

He said conventional classifications of economies often obscure important structural differences, noting that the term emerging markets groups together countries with widely divergent industrial bases. Economies that depend heavily on manufacturing exports rely critically on market access and trade integration and therefore face stronger competitive pressures from Chinese exports that are increasingly shifting toward alternative markets.

Saudi Arabia, by contrast, exports extensively while facing limited direct competition from China in its primary export commodity, a situation that creates a strategic opportunity. The current environment allows the Kingdom to obtain imports from China at lower cost and access a broader range of goods that previously flowed largely toward the United States market.

Addressing how emerging economies should respond to dumping pressures and rising competition, Antràs said countries should minimize protectionist tendencies and instead position themselves as committed participants in the multilateral trading system, allowing foreign producers to access domestic markets while encouraging domestic firms to expand internationally.

He noted that although Chinese dumping presents concerns for countries with manufacturing sectors that compete directly with Chinese production, the risk is lower for Saudi Arabia because it does not maintain a large manufacturing base that overlaps directly with Chinese exports. Lower-cost imports could benefit Saudi consumers, while targeted policy tools such as credit programs, subsidies, and support for firms seeking to redesign and upgrade business models represent more effective responses than broad protectionist measures.

Globalization has not ended

Antràs said globalization continues but through more complex structures, with trade agreements increasingly negotiated through diverse arrangements rather than relying primarily on multilateral negotiations. Trade deals will continue to be concluded, but they are likely to become more complex, with uncertainty remaining a defining feature of the global trading environment.

Interest rates and artificial intelligence

According to Antràs, high global interest rates, combined with the additional risk premiums faced by emerging markets, are constraining investment, particularly in sectors that require export financing, capital expenditure, and continuous quality upgrading.

However, he noted that elevated interest rates partly reflect expectations of stronger long-term growth driven by artificial intelligence and broader technological transformation.

He also said if those growth expectations materialize, productivity gains could enable small and medium-sized enterprises to forecast demand more accurately and identify previously untapped markets, partially offsetting the negative effects of higher borrowing costs.

Employment concerns and the role of government

The Harvard professor warned that labor markets face a dual challenge stemming from intensified Chinese export competition and accelerating job automation driven by artificial intelligence, developments that could lead to significant disruptions, particularly among younger workers. He said governments must adopt proactive strategies requiring substantial fiscal resources to mitigate near-term labor-market shocks.

According to Antràs, productivity growth remains the central condition for success: if new technologies deliver the anticipated productivity gains, governments will gain the fiscal space needed to compensate affected groups and retrain the workforce, achieving a balance between addressing short-term disruptions and investing in long-term strategic gains.