IMF: AI Productivity Gains Could Offset Asia’s Aging Workforce, but Risks Abound

BANGKOK – Artificial intelligence could help Asia counter the economic drag of its rapidly aging population, but the benefits risk being unevenly distributed and the region faces mounting headwinds from an energy shock, rising global yields and a possible correction in the AI boom, the International Monetary Fund said this week.

Speaking at the launch of an IMF book on challenges and opportunities in Asia on Monday, IMF Managing Director Kristalina Georgieva said AI is projected to lift growth in advanced Asia, where populations are aging fastest, by between half a percentage point and one percentage point. “What is amazing is that if the countries capture productivity and this growth, they will more than offset the demographic pressure,” she said.

Findings presented in the book show that countries such as China, Japan and South Korea could lose nearly 25% of their working population between now and 2050, a loss that could be offset by productivity gains from AI, according to the IMF.

Krishna Srinivasan, director of the IMF’s Asia and Pacific Department, cautioned that policymakers must balance the benefits of AI adoption against the risk of widening divergence across the region. “What matters is whether AI augments workers or automates jobs. Advanced economies, for sure, are more exposed, but they are also better placed to benefit. Emerging markets are less exposed, but also less in a position to capture the upside,” Srinivasan said at the book launch, held on the sidelines of the IMF and World Bank annual meetings in Bangkok.

He added that reforms to raise skills and productivity could bring AI adoption forward by a decade or more. Georgieva also said deeper regional trade agreements and a reduction in non-tariff barriers could raise Asia’s GDP by about 1.8% in the long run.

**Growth to Moderate Amid Multiple Risks**

The IMF’s broader Regional Economic Outlook for Asia and the Pacific, released Thursday, projects the region’s economy will grow 4.8% in 2026 and 4.4% in 2027, slowing from 5.0% in 2025. While the 2026 forecast is higher than the April projection, the deceleration reflects the drag from higher energy prices in emerging Asia.

Advanced Asian economies are expected to see growth accelerate to 3.2% in 2026 from 2.5% last year, largely driven by the AI boom. But emerging Asia, the region’s main growth engine, will likely moderate to 5.1% in 2026 from 5.6% in 2025 due to the energy shock, the IMF said.

The lender warned that risks to the outlook remain tilted to the downside. A prolonged stalemate in the Middle East conflict could keep commodity prices high and deplete oil reserves. A correction in AI demand could weigh on global growth, with effects likely to be pronounced in Asia given its extensive exposure to the AI production chain.

Rising global bond yields pose another threat. The IMF said market stress in major sovereign issuers such as the United States, the United Kingdom, the euro zone and Japan could spill over to Asian bond markets, pushing up yields and exacerbating already-elevated fiscal vulnerabilities. “With public debt and borrowing needs remaining high across much of the region, an abrupt tightening of financial conditions could further strain public finances by raising debt-servicing costs,” the IMF said.

Uncertainty over the US monetary policy path could keep Asian financial markets volatile, the report added. “Exchange rates and capital flows have become more volatile since the energy shock this year,” with several emerging economies experiencing depreciation pressures.

**Central Banks Urged to Stay Focused on Price Stability**

Asian central banks should remain focused on price stability and “respond promptly” if inflationary pressures become more persistent, the IMF said. Srinivasan told a press conference that central banks should communicate clearly and be ready to tighten where expectations are less anchored or inflation is more persistent. “The independence of central banks must be maintained,” he said.

Fiscal policy should be targeted and temporary, the IMF urged, advising countries to avoid blanket fuel subsidies or price controls that could be more costly.

On India, the IMF said the country entered the energy shock with strong fundamentals and has responded well. The Fund projects India’s GDP growth at 7% in both 2026 and 2027, backed by resilient domestic demand and strong services activity. Srinivasan said the pressure on India’s exchange rate should not be read as a sign of economic failure, noting it reflects global interest rates, investor risk appetite and oil prices.

The IMF’s baseline assumes oil at about $96 a barrel in 2026 and that the Strait of Hormuz reopens from March 2027.

**AI as a Double-Edged Sword**

While AI offers a potential offset to demographic decline, the IMF stressed that its benefits are not automatic. The divergence between advanced and emerging economies in their ability to capture AI gains could deepen existing inequalities. Srinivasan noted that emerging markets are less exposed to AI automation but also less positioned to benefit from its productivity boost.

The IMF’s message from Bangkok is clear: AI can help Asia age gracefully, but only if adoption is broad-based and accompanied by reforms in skills, trade and fiscal policy. Meanwhile, the region must navigate a thicket of immediate risks from energy and financial markets that could derail growth before the AI dividend fully materializes.