The World Bank raised its 2026 growth forecast for East Asia and the Pacific to 4.5%, citing the strength of artificial-intelligence-related exports and investment. But the outlook comes with a vulnerability: AI-linked goods account for a large share of export growth across the region, leaving economies exposed if global technology spending weakens. The bank expects growth to slow to 4.4% in 2027 and 4.3% in 2028.
AI trade is carrying a large share of growth
The region comprises 23 economies, including China, Vietnam, Indonesia, Malaysia and Thailand. The new 2026 projection is 0.3 percentage point higher than the World Bank’s April forecast. Vietnam received the largest upgrade among the region’s major economies, with its outlook lifted by 1.1 percentage point to 7.4%.
The export gains are concentrated in AI-related products. The bank said those goods generated more than half of export growth in most regional economies, and over 70% in Malaysia, the Philippines, Thailand and Vietnam. Trade excluding AI-related goods has been weak or negative, making the technology-driven contribution especially important to the regional outlook.
Supply-chain exposure extends beyond exports
China, Indonesia, Malaysia, the Philippines, Thailand and Vietnam shipped $1.4 trillion in AI-related goods in the 12 months through April, the report said. That trade ties the region’s near-term growth to continued demand for the hardware and components used in AI systems, rather than to a broad-based increase in other exports.
South Korea’s September exports rose 83.5% to a record $120.9 billion, with chips accounting for half of shipments. The World Bank also highlighted concentration in the country’s stock market: Samsung and SK Hynix together represented 43% of the benchmark Kospi’s value at the end of April. Those figures illustrate how AI demand can support trade and financial markets while concentrating exposure in a small number of products and companies.
Investment boom brings correction risk
The bank’s concern is not limited to exports. AI-related capital expenditure has reached about 6% of US GDP, a level comparable with the 2000 peak in information-technology investment. It said the current investment cycle has accelerated more quickly than earlier cycles and is still gaining pace, raising the risk that spending could outstrip demand that ultimately materialises.
A pullback would not automatically end the AI investment cycle, the bank noted, but could reveal that investment had moved ahead of realised demand. The Bank for International Settlements had also warned in its June annual economic report that the boom’s scale and speed resembled the dot-com surge of the 1990s and other market manias. For East Asia, the concern is direct: a slowdown centred on AI could hit a region prominent in the technology supply chain.
Financing could amplify a downturn
The World Bank estimates that $2.9 trillion in AI capital spending is planned for 2025–2028, with $800 billion expected to come from private credit. AI-related lending made up 34% of private-credit activity in 2025, compared with an 18% average over the prior five years. The bank cautioned that these markets are less visible and have not been tested by a severe downturn.
The source material also notes markdowns, outflows and defaults in private-credit portfolios this year. Separately, the OECD has flagged how AI companies’ reliance on energy and opaque financing models could magnify shocks if expected returns fail to appear. These risks matter because losses or tighter financing could weaken the investment that has helped sustain demand for regional technology exports.
Financial spillovers could reach local economies
The World Bank estimates that a 1 percentage point slowdown in US growth reduces growth in other emerging markets by 0.6 percentage point, with the investment impact about twice as large. It warned that a downturn concentrated in AI would be significant for East Asia because of the region’s role in the supply chain. The report also pointed to foreign-currency bank liabilities equal to 29.2% of GDP in Malaysia and 20.7% in the Philippines.
Taiwan’s statistics bureau raised its 2026 growth forecast to 11% from 9.6% on AI demand, while warning in June that trouble in the high-tech sector could have a larger-than-expected effect on the local economy. Together, Taiwan’s revised outlook and the bank’s regional forecast show both sides of the boom: stronger expected growth now, and greater sensitivity if technology demand or financing turns.
Takeaway: The 4.5% forecast is stronger, but its reliance on AI exports and investment leaves East Asia and the Pacific vulnerable to a concentrated tech-sector slowdown.
References
- ajg.com — “Asia Pacific Market Watch”
- ent.news — “[PDF] Global Investment Outlook 2026 Positioning for a New Monetary Era”
- deloitte.com — “Global economic outlook 2026”
- oecd.org — “OECD Economic Outlook, Volume 2026 Issue 1 (EN)”
- Durable Global Trade in the Age — “Supply Chain Financing”
