East Asia-Pacific Growth Holds Firm as AI Boom Powers Exports, World Bank Says

The World Bank has upgraded its growth outlook for East Asia and the Pacific, forecasting the region’s economy to expand by 4.5% in 2026, thanks largely to strong demand for artificial intelligence-related products.

The revised forecast is 0.3 percentage points higher than the bank’s estimate in April. While the region continues to benefit from the global AI boom, the World Bank cautioned that growing reliance on technology exports could become a weakness if global spending on AI starts to slow.

The East Asia-Pacific region includes 23 economies, among them China, Vietnam, Indonesia, Malaysia, and Thailand.

Vietnam leads forecast upgrades

Among the major economies highlighted in the report, Vietnam received the biggest upgrade. The World Bank now expects Vietnam’s economy to grow 7.4% in 2026, up 1.1 percentage points from its previous forecast.

Malaysia’s growth projection was raised by 0.7 percentage point to 5.1%, while Thailand also saw a 0.7 percentage-point increase, bringing its forecast to 2.0%.

AI exports are driving growth

A major reason for the improved outlook is the rapid expansion of AI-related trade.

The World Bank said products linked to AI generated more than half of export growth across most economies in the region. In several manufacturing hubs, the dependence is even greater.

In Malaysia, the Philippines, Thailand, and Vietnam, AI-related goods accounted for more than 70% of export growth. Together, China, Indonesia, Malaysia, the Philippines, Thailand, and Vietnam exported around US$1.4 trillion worth of AI-related products in the 12 months ending in April.

The influence of AI is also visible in financial markets. In South Korea, for example, semiconductor giants Samsung Electronics and SK Hynix represented 43% of the KOSPI’s total market value at the end of April, highlighting the sector’s dominant role in the economy.

Heavy AI investment brings risks

While AI is creating opportunities, the World Bank warned that it is also creating new vulnerabilities.

In the United States, AI-related investment has climbed to roughly 6% of GDP, a level similar to the peak of technology investment during the dot-com era in 2000.

Globally, around US$2.9 trillion in AI-related capital spending is planned between 2025 and 2028, with as much as US$800 billion expected to come from private credit markets. AI-related lending made up 34% of private-credit activity in 2025, nearly double the average share seen over the previous five years.

The concern is that if AI investment slows, the impact could ripple across East Asia’s manufacturing and supply chains. The World Bank estimates that a one-percentage-point slowdown in US economic growth would reduce growth in emerging markets by about 0.6 percentage points, with investment likely to be hit hardest.

Energy prices and weather risks remain

The region also faces risks from rising energy costs. Indonesia, Thailand, and Vietnam have introduced measures to soften the impact of higher fuel prices on consumers, but the World Bank noted that their foreign exchange reserves have fallen significantly this year.

If energy prices rise again, inflation could increase, consumer spending could weaken, and financial conditions could tighten, especially if the slowdown happens at the same time as weaker AI investment.

The bank also highlighted the threat of El Niño-related weather disruptions, which could affect both agriculture and manufacturing supply chains across the region.

Growth is strong, but dependence on AI is growing

For now, East Asia-Pacific economies continue to benefit from robust demand for technology products, helping the region maintain solid growth despite global uncertainty.

However, the World Bank’s latest outlook also highlights a growing challenge: the AI boom that is driving growth today could become a source of risk tomorrow if global technology investment begins to lose momentum.

Makon Financials