By Jihye Lee and Kimberley Kao

Asia's growth outlook remains broadly intact despite the Middle East conflict, though elevated energy costs pose a key risk, International Monetary Fund officials said.

"As it turns out, 2025 was much better than expected," said Thomas Helbling, deputy director of the IMF's Asia-Pacific Department, in an interview.

The region entered this year on firmer footing, supported by resilient exports and strong technology demand, he said.

"That momentum matters for the annual growth figures," Helbling said, noting that a strong start to 2026 is helping cushion the impact of the energy shock.

Still, uncertainty remains elevated as the conflict in the Middle East continues.

"The shock is still playing out," he said, adding that the scale and persistence of disruptions to energy supply remain difficult to gauge.

The IMF's baseline assumes the conflict will be short-lived but still weigh on the global economy. It projects oil prices to average about $80 a barrel this year, with global growth expected to slow to 3.1% from 3.4% last year.

In an adverse scenario where the conflict drags on, oil could hover near $100 a barrel for much of the year, posing a larger drag on growth.

Asia is "very energy-intensive," making it "much more vulnerable to the energy shock than many other regions," said Krishna Srinivasan, director of the IMF's Asia-Pacific Department, in a press briefing.

Policymakers should deploy targeted but temporary fiscal support, he said.

"Fiscal policy requires a careful balancing act," Srinivasan said. "Broad fuel subsidies, tax cuts and general price caps may smoothen inflation in the short run, but they are costly, distortionary, often regressive and very hard to unwind."

The IMF is closely monitoring oil and gas prices, as well as the potential strain in energy supply chains, particularly given Asia's reliance on imports passing through chokepoints such as the Strait of Hormuz, he said.

"Countries are adjusting as we go along," Helbling said.

Write to Jihye Lee at jihye.lee@wsj.com and Kimberley Kao at kimberley.kao@wsj.com

(END) Dow Jones Newswires

April 19, 2026 22:45 ET (02:45 GMT)

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