Reforms to boost trade and investment in the Asia-Pacific region will help fuel durable growth for years to come, according to the International Monetary Fund ( IMF ).

Krishna Srinivasan, director of the fund’s Asia and Pacific Department, says the IMF's regional economic outlook ( REO ), to be launched in Hong Kong on October 24, “shows that deeper regional integration could yield sizeable gains”.

“Countries can cut non-tariff barriers, broaden and modernize trade agreements to cover services and digital trade, and ease FDI restrictions,” Srinivasan says.

“We also show in our REO that countries in Asia need to boost capital efficiency, making sure every dollar invested has a strong return.”

He underscores the need for “deeper bond and equity markets, broader market-based finance, and stronger insolvency and debt worker frameworks”.

At the same time, Srinivasan notes that capital flows to the most productive firms. As such, “a much-needed cleanup or streamlining of regulations in countries across the region can help unleash the full potential of the private sector”.

With greater integration in Asia-Pacific, the IMF official reckons regional gross domestic product ( GDP ) could increase by as much as 1.4% in the medium term.

Asean would benefit even more given that Southeast Asia is “much more open” and linked to global supply chains, he says, adding that GDP could increase by almost 4% with deeper integration.

‘Asia's story in 2025 is one of resilience’

Speaking on the sidelines of the IMF’s annual meeting in Washington last week, Srinivasan said current economic activity in Asia-Pacific is “holding up better than expected” despite the region bearing the brunt of US tariffs and policy uncertainty remaining high.

Growth for the region is projected at 4.5% this year and 4.1% next year.

“Asia's story in 2025 is one of resilience,” the IMF official says. “The task ahead is renewal policies that anchor stability today while unlocking stronger, more durable growth tomorrow.”

This resilience reflects three key factors – strong exports, a technology boom, and accommodative macro-economic policies that have been reinforced by favourable financial conditions.

“Exports were supported by firms front-loading shipments ahead of the tariff hikes,” he says, referring to increased import duties in the United States.

"Tariffs themselves, while still higher than the beginning of the year, are lower than what we expected back in April.”

Srinivasan notes that export strength has also been driven by a surge in intra-regional trade and the technology boom in artificial intelligence ( AI ) that lifted high-tech exports, especially from Korea and Japan.

"Buoyant activity has been supported by an easing of either monetary or fiscal policy, or in some cases, both across many countries in the region,” he says.

“Booming equity markets, lower long-term borrowing costs, and a weak dollar have also helped."

Downside risks to outlook

But risks to the current outlook are to the downside. "The dust on tariffs has not yet settled. They could still increase,” Srinivasan warns.

“Similarly, risk premia and interest rates could rise again, especially if trade policy uncertainty or geopolitical tensions intensify, and a tightening of financial conditions could further increase debt-related vulnerabilities and stifle growth.”

Among major economies in the region, Srinivasan says China’s growth is likely to moderate from 4.8% this year to 4.2% next year. “Uncertainty remains high,” he says, adding that deflationary pressures persist.

Elsewhere, growth is forecast to slow from 1.1% this year to 0.6% next year in Japan and from 6.6% to 6.2% in India. In South Korea, however, growth is projected to double from 0.9% this year to 1.8% next year.

The Asean economies are forecast to expand by 4.3% for the second consecutive year, supported by strong exports and – in some countries – policy support.