IMF warns Asia-Pacific labor markets must adapt as AI reshapes factory and office jobs

The International Monetary Fund said on Thursday that the technology boom sustaining growth across Asia-Pacific is also exposing weaknesses in the region's labor market, and it urged governments to prepare workers for the changes. The fund's Regional Economic Outlook: Asia and Pacific, presented in Bangkok during the annual meetings of the IMF and the World Bank, puts regional growth at 4.8 percent, lifted by strong global demand for semiconductors and artificial intelligence infrastructure.

The report warns that over the longer term AI could deepen underemployment and widen gaps between the skills employers need and those workers hold. It said AI is reshaping occupations and the demand for skills in those roles, and that policymakers across the region should encourage the creation of high-quality jobs, help workers acquire relevant skills and make it easier for labor to move where it is needed.

Hiring demand in exposed roles

Krishna Srinivasan, director of the IMF's Asia and Pacific department, said hiring in jobs more exposed to AI has been hit, with employer demand down 10 percent. He said that decline has stabilized even as AI capability has increased, which suggests the technology is changing work more than removing it outright. Employers, he said, are looking for workers who can use AI tools.

Srinivasan identified youth unemployment and skills mismatches as structural problems the region must address while supporting adoption of AI. He said the impact on individual countries varies widely, pointing to the fund's AI Preparedness Index, which weighs digital infrastructure, human capital, labor market policies, innovation, economic integration, and regulation and ethics. For members of the Association of Southeast Asian Nations, he said the priority should be developing human capital by upskilling the workforce and ensuring education systems support lifelong learning.

The fund noted that Malaysia and Singapore are deeply embedded in the global AI supply chain and are among the main beneficiaries of the investment boom. That position supports output and exports, but the report argues it does not by itself secure broader employment gains. The call for retraining lands squarely on industries where industrial automation is spreading through factories, logistics operations and electronics plants, changing which roles employers fill and what they expect of new hires.

What it means for workers

For working adults and students planning careers, the report points to a shift in the skills that carry value rather than a simple loss of positions. Roles built around repetitive manual tasks face the greatest pressure, while jobs that combine technical knowledge with the ability to work alongside digital systems are in demand. The fund's emphasis on labor mobility suggests workers may also need to look beyond their home labor markets for opportunities, and that governments should smooth that movement rather than restrict it.

The report also places responsibility on employers and training systems. Srinivasan said the region needs structural reforms that address youth unemployment and skills gaps while still encouraging AI adoption. That combination implies training programs tied to actual hiring needs, and education systems that keep adults learning well beyond their initial qualifications.

What to watch next

Attention now turns to how governments across Southeast Asia and the wider region translate the fund's recommendations into policy. Measures to watch include changes to vocational training, incentives for employers to retrain staff, and updates to education curricula that reflect AI-related skill requirements. Economists will also track whether hiring in AI-exposed occupations continues to level off or resumes a decline as tools become more capable, and whether the 4.8 percent growth forecast holds through the rest of the year.