.png){kind=logo}
The World Bank raised its growth forecast for East Asia and the Pacific as artificial intelligence exports strengthened regional trade. Yet the bank warned that heavy reliance on AI demand leaves economies exposed to a global technology spending slowdown. The region should grow 4.5% this year, up 0.3 percentage points from the bank's April forecast. Growth should then ease to 4.4% in 2027 and 4.3% in 2028.
Vietnam received the largest forecast upgrade among the region's major economies. The World Bank lifted its projection by 1.1 percentage points to 7.4%.
The East Asia and the Pacific region includes 23 economies. They include China, Vietnam, Indonesia, Malaysia, and Thailand.
AI-related manufacturing has become a major driver of regional exports. The World Bank said trade growth excluding AI-related goods remained weak or negative. AI products generated more than half of export growth across most economies in the region. Their share exceeded 70% in Malaysia, the Philippines, Thailand, and Vietnam.
China, Indonesia, Malaysia, the Philippines, Thailand, and Vietnam exported USD 1.4 trillion in AI-related goods during the 12 months through April. South Korea also recorded a sharp export increase. Official data showed exports jumped 83.5% in September to a record USD 120.9 billion.
Chips represented half of those shipments. Meanwhile, Samsung and SK Hynix accounted for 43% of the benchmark Kospi index's value at the end of April. Taiwan has also benefited from strong technology demand. Its statistics bureau recently raised its 2026 growth forecast from 9.6% to 11%.
Still, Taiwan's agency warned in June that weakness in the high-tech sector could produce a larger negative effect on the domestic economy.
The World Bank identified global AI spending as a key source of risk. AI-related capital expenditure has reached about 6% of U.S. GDP. That level matches the peak in information-technology investment recorded in 2000. The current investment cycle has also expanded faster than previous cycles and continues to accelerate.
The Bank for International Settlements raised similar concerns in June. Its annual economic report compared the scale and speed of the boom with the dot-com frenzy and other historical manias.
Financing patterns add another layer of exposure. Companies plan about USD 2.9 trillion in AI capital expenditure between 2025 and 2028. Private credit could provide about USD 800 billion of that amount. AI-related lending represented 34% of private credit activity in 2025.
That compares with an average of 18% during the previous five years. Private credit portfolios have also faced markdowns, outflows, and defaults this year. The World Bank said private credit markets remain less visible and have not faced a severe downturn.
Read More: World Bank Flags Heat Risk to India’s Jobs, Cities and Economic Growth
Tighter global financial conditions could slow the AI boom. Major central banks have started raising rates for the first time since 2023. The U.S. Federal Reserve increased rates last month, marking its first rise in more than three years. It also signaled another possible increase this year.
According to the World Bank, a correction would not necessarily end the AI investment cycle. Instead, it could indicate that investment had moved ahead of realized demand. A one-percentage-point slowdown in U.S. growth could reduce growth in other emerging markets by an estimated 0.6 percentage point. The impact on investment could be roughly twice as large.
East Asia faces particular exposure given its major role in the global AI supply chain. Bank funding creates another channel of risk. Foreign-currency liabilities among banks reached 29.2% of GDP in Malaysia and 20.7% in the Philippines.
The World Bank raised its East Asia growth outlook as AI exports support manufacturing and trade. Still, strong dependence on technology demand, rising private credit exposure and tighter financial conditions could test regional growth if global AI investment weakens.
