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IMF analysis flags slowing productivity, ageing populations, trade fragmentation, energy risks and widening inequality
Pooja Srivastava | Anytime News Network
: Asia’s position as the driving force of the global economy is facing growing pressure as the traditional growth model built on industrialisation, exports and investment begins to show clear signs of strain.
According to an analysis by the International Monetary Fund (IMF), Asia accounts for nearly 40 percent of global output and around two-thirds of global economic growth. While this remarkable rise lifted hundreds of millions of people out of poverty, the region now faces a difficult task: maintaining growth in an increasingly uncertain, ageing and fragmented world.
One of the most serious concerns is the slowdown in productivity growth. Since the global financial crisis, productivity gains have weakened across much of Asia. Although investment remains high, returns on capital have declined. Financial systems that remain heavily dependent on banks often favour large and established businesses over younger, faster-growing and more innovative firms.
As a result, capital and other resources can remain locked in less productive enterprises, limiting innovation, competitiveness and employment opportunities. The IMF has called for better-quality investment, stronger financial systems, deeper capital markets and wider access to venture finance.
Demographic change is adding another layer of pressure. Fertility rates have fallen sharply across Asia, while life expectancy has increased. By 2050, one in five people in Asia is expected to be aged 65 or above. An ageing population could reduce labour-force growth and place greater pressure on public finances through rising pension and health-care costs.
Trade fragmentation is also threatening the region’s export-driven economies. Geopolitical tensions are reshaping supply chains, investment flows and manufacturing employment. Countries dependent on external demand are becoming more vulnerable to trade shocks, while heavy reliance on imported energy exposes economies to sudden price increases and distant conflicts.
Artificial intelligence and digitalisation may offer new opportunities, but their benefits are unlikely to be distributed equally. Economies with skilled workers, strong institutions and better digital infrastructure are expected to gain more, while weaker countries could fall further behind. Within countries, AI may also widen wage gaps by benefiting highly skilled workers and displacing others.
The IMF has warned that Asia’s future growth will depend on whether governments can respond to these pressures through better education, digital infrastructure, financial inclusion, regional integration and stronger social protection.
The region’s earlier economic success provides a strong foundation, but it is no longer a guarantee of continued prosperity. Without timely reforms, Asia could face slower growth, fewer quality jobs, deeper inequality and rising fiscal stress.
The challenge before policymakers is no longer simply to expand the economy, but to ensure that growth remains productive, inclusive, sustainable and capable of creating opportunities for a changing population.
